Correlation Between Iochpe Maxion and Eucatex SA

Can any of the company-specific risk be diversified away by investing in both Iochpe Maxion and Eucatex SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Iochpe Maxion and Eucatex SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iochpe Maxion SA and Eucatex SA Indstria, you can compare the effects of market volatilities on Iochpe Maxion and Eucatex SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Iochpe Maxion with a short position of Eucatex SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iochpe Maxion and Eucatex SA.

Diversification Opportunities for Iochpe Maxion and Eucatex SA

-0.38

Correlation Coefficient

Iochpe Maxion  Eucatex SA

Very good diversification

The 3 months correlation between Iochpe and Eucatex is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Eucatex SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eucatex SA Indstria and Iochpe Maxion is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Iochpe Maxion SA are associated (or correlated) with Eucatex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eucatex SA Indstria has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Eucatex SA go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Eucatex SA

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 1.33 times more return on investment than Eucatex SA. However, Iochpe Maxion is 1.33 times more volatile than Eucatex SA Indstria. It trades about 0.1 of its potential returns per unit of risk. Eucatex SA Indstria is currently generating about -0.1 per unit of risk. If you would invest  1,106  in Iochpe Maxion SA on September 13, 2024 and sell it today you would earn a total of  157.00  from holding Iochpe Maxion SA or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Iochpe Maxion SA  vs.  Eucatex SA Indstria

Iochpe Maxion SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Iochpe Maxion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Eucatex SA Indstria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eucatex SA Indstria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Iochpe Maxion and Eucatex SA

The main advantage of trading using opposite Iochpe Maxion and Eucatex SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iochpe Maxion position performs unexpectedly, Eucatex SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eucatex SA will offset losses from the drop in Eucatex SA's long position.

The idea behind Iochpe Maxion SA and Eucatex SA Indstria pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.