Correlation Between Fundo Investimento and FDO INV

Can any of the company-specific risk be diversified away by investing in both Fundo Investimento and FDO INV 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 Fundo Investimento and FDO INV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundo Investimento Imobiliario and FDO INV IMOB, you can compare the effects of market volatilities on Fundo Investimento and FDO INV 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 Fundo Investimento with a short position of FDO INV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo Investimento and FDO INV.

Diversification Opportunities for Fundo Investimento and FDO INV

-0.41

Correlation Coefficient

Fundo Investimento  FDO INV

Very good diversification

The 3 months correlation between Fundo and FDO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and FDO INV IMOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO INV IMOB and Fundo Investimento 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 Fundo Investimento Imobiliario are associated (or correlated) with FDO INV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO INV IMOB has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and FDO INV go up and down completely randomly.

Pair Corralation between Fundo Investimento and FDO INV

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to under-perform the FDO INV. But the fund apears to be less risky and, when comparing its historical volatility, Fundo Investimento Imobiliario is 1.06 times less risky than FDO INV. The fund trades about -0.14 of its potential returns per unit of risk. The FDO INV IMOB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  138,282  in FDO INV IMOB on September 13, 2024 and sell it today you would earn a total of  6,718  from holding FDO INV IMOB or generate 4.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Fundo Investimento Imobiliario  vs.  FDO INV IMOB

Fundo Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investimento Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

FDO INV IMOB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundo Investimento and FDO INV

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

The idea behind Fundo Investimento Imobiliario and FDO INV IMOB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.