Correlation Between PX Prague and Fondo Mutuo

Can any of the company-specific risk be diversified away by investing in both PX Prague and Fondo Mutuo 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 PX Prague and Fondo Mutuo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PX Prague Stock and Fondo Mutuo ETF, you can compare the effects of market volatilities on PX Prague and Fondo Mutuo 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 PX Prague with a short position of Fondo Mutuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of PX Prague and Fondo Mutuo.

Diversification Opportunities for PX Prague and Fondo Mutuo

0.59

Correlation Coefficient

PX Prague  Fondo Mutuo

Very weak diversification

The 3 months correlation between PX Prague and Fondo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PX Prague Stock and Fondo Mutuo ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondo Mutuo ETF and PX Prague 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 PX Prague Stock are associated (or correlated) with Fondo Mutuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondo Mutuo ETF has no effect on the direction of PX Prague i.e., PX Prague and Fondo Mutuo go up and down completely randomly.

Pair Corralation between PX Prague and Fondo Mutuo

Assuming the 90 days trading horizon PX Prague Stock is expected to generate 0.68 times more return on investment than Fondo Mutuo. However, PX Prague Stock is 1.48 times less risky than Fondo Mutuo. It trades about 0.16 of its potential returns per unit of risk. Fondo Mutuo ETF is currently generating about 0.04 per unit of risk. If you would invest  160,696  in PX Prague Stock on September 1, 2024 and sell it today you would earn a total of  7,522  from holding PX Prague Stock or generate 4.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

PX Prague Stock  vs.  Fondo Mutuo ETF

Pair Trading with PX Prague and Fondo Mutuo

The main advantage of trading using opposite PX Prague and Fondo Mutuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PX Prague position performs unexpectedly, Fondo Mutuo 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 Fondo Mutuo will offset losses from the drop in Fondo Mutuo's long position.

The idea behind PX Prague Stock and Fondo Mutuo ETF 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.