Correlation Between Fator IFIX and Fertilizantes Heringer

Can any of the company-specific risk be diversified away by investing in both Fator IFIX and Fertilizantes Heringer 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 Fator IFIX and Fertilizantes Heringer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fator IFIX Fundo and Fertilizantes Heringer SA, you can compare the effects of market volatilities on Fator IFIX and Fertilizantes Heringer 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 Fator IFIX with a short position of Fertilizantes Heringer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fator IFIX and Fertilizantes Heringer.

Diversification Opportunities for Fator IFIX and Fertilizantes Heringer

0.9

Correlation Coefficient

Fator IFIX  Fertilizantes Heringer

Almost no diversification

The 3 months correlation between Fator and Fertilizantes is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fator IFIX Fundo and Fertilizantes Heringer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizantes Heringer and Fator IFIX 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 Fator IFIX Fundo are associated (or correlated) with Fertilizantes Heringer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizantes Heringer has no effect on the direction of Fator IFIX i.e., Fator IFIX and Fertilizantes Heringer go up and down completely randomly.

Pair Corralation between Fator IFIX and Fertilizantes Heringer

Assuming the 90 days trading horizon Fator IFIX Fundo is expected to generate 0.85 times more return on investment than Fertilizantes Heringer. However, Fator IFIX Fundo is 1.18 times less risky than Fertilizantes Heringer. It trades about -0.18 of its potential returns per unit of risk. Fertilizantes Heringer SA is currently generating about -0.25 per unit of risk. If you would invest  6,071  in Fator IFIX Fundo on September 1, 2024 and sell it today you would lose (956.00) from holding Fator IFIX Fundo or give up 15.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Fator IFIX Fundo  vs.  Fertilizantes Heringer SA

Fator IFIX Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fator IFIX Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fertilizantes Heringer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fertilizantes Heringer SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fator IFIX and Fertilizantes Heringer

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

The idea behind Fator IFIX Fundo and Fertilizantes Heringer SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.