Correlation Between WEG SA and Melnick Even

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

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

Diversification Opportunities for WEG SA and Melnick Even

-0.42

Correlation Coefficient

WEG SA  Melnick Even

Very good diversification

The 3 months correlation between WEG and Melnick is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and Melnick Even Desenvolvimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melnick Even Desenvo 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 Melnick Even. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melnick Even Desenvo has no effect on the direction of WEG SA i.e., WEG SA and Melnick Even go up and down completely randomly.

Pair Corralation between WEG SA and Melnick Even

Assuming the 90 days trading horizon WEG SA is expected to under-perform the Melnick Even. But the stock apears to be less risky and, when comparing its historical volatility, WEG SA is 1.53 times less risky than Melnick Even. The stock trades about -0.02 of its potential returns per unit of risk. The Melnick Even Desenvolvimento is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  349.00  in Melnick Even Desenvolvimento on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Melnick Even Desenvolvimento or generate 0.57% return on investment over 90 days.

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

WEG SA  vs.  Melnick Even Desenvolvimento

WEG SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WEG SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Melnick Even Desenvo

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Melnick Even Desenvolvimento are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Melnick Even is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WEG SA and Melnick Even

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

The idea behind WEG SA and Melnick Even Desenvolvimento 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.