Correlation Between WEG SA and A1VY34

Can any of the company-specific risk be diversified away by investing in both WEG SA and A1VY34 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 WEG SA and A1VY34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WEG SA and A1VY34, you can compare the effects of market volatilities on WEG SA and A1VY34 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 WEG SA with a short position of A1VY34. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEG SA and A1VY34.

Diversification Opportunities for WEG SA and A1VY34

0.5

Correlation Coefficient

WEG SA  A1VY34

Very weak diversification

The 3 months correlation between WEG and A1VY34 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and A1VY34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1VY34 and WEG SA 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 WEG SA are associated (or correlated) with A1VY34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1VY34 has no effect on the direction of WEG SA i.e., WEG SA and A1VY34 go up and down completely randomly.

Pair Corralation between WEG SA and A1VY34

Assuming the 90 days trading horizon WEG SA is expected to under-perform the A1VY34. In addition to that, WEG SA is 32.95 times more volatile than A1VY34. It trades about -0.01 of its total potential returns per unit of risk. A1VY34 is currently generating about 0.15 per unit of volatility. If you would invest  57,767  in A1VY34 on September 23, 2024 and sell it today you would earn a total of  175.00  from holding A1VY34 or generate 0.3% return on investment over 90 days.

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

WEG SA  vs.  A1VY34

WEG SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WEG SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

A1VY34

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in A1VY34 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, A1VY34 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WEG SA and A1VY34

The main advantage of trading using opposite WEG SA and A1VY34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA position performs unexpectedly, A1VY34 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 A1VY34 will offset losses from the drop in A1VY34's long position.

The idea behind WEG SA and A1VY34 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.