Correlation Between DAIDO METAL and POLENERGIA

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

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

Diversification Opportunities for DAIDO METAL and POLENERGIA

-0.17

Correlation Coefficient

DAIDO METAL  POLENERGIA

Good diversification

The 3 months correlation between DAIDO and POLENERGIA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding DAIDO METAL TD and POLENERGIA SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POLENERGIA SA ZY and DAIDO METAL 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 DAIDO METAL TD are associated (or correlated) with POLENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POLENERGIA SA ZY has no effect on the direction of DAIDO METAL i.e., DAIDO METAL and POLENERGIA go up and down completely randomly.

Pair Corralation between DAIDO METAL and POLENERGIA

Assuming the 90 days horizon DAIDO METAL TD is expected to under-perform the POLENERGIA. But the stock apears to be less risky and, when comparing its historical volatility, DAIDO METAL TD is 1.44 times less risky than POLENERGIA. The stock trades about -0.22 of its potential returns per unit of risk. The POLENERGIA SA ZY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,600  in POLENERGIA SA ZY on October 26, 2024 and sell it today you would earn a total of  15.00  from holding POLENERGIA SA ZY or generate 0.94% return on investment over 90 days.

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

DAIDO METAL TD  vs.  POLENERGIA SA ZY

DAIDO METAL TD

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DAIDO METAL TD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DAIDO METAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

POLENERGIA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POLENERGIA SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, POLENERGIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DAIDO METAL and POLENERGIA

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

The idea behind DAIDO METAL TD and POLENERGIA SA ZY 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.