Correlation Between Bombril SA and Mundial SA

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

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

Diversification Opportunities for Bombril SA and Mundial SA

-0.13

Correlation Coefficient

Bombril SA  Mundial SA

Good diversification

The 3 months correlation between Bombril and Mundial is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bombril SA and Mundial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundial SA and Bombril 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 Bombril SA are associated (or correlated) with Mundial SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundial SA has no effect on the direction of Bombril SA i.e., Bombril SA and Mundial SA go up and down completely randomly.

Pair Corralation between Bombril SA and Mundial SA

Assuming the 90 days trading horizon Bombril SA is expected to under-perform the Mundial SA. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bombril SA is 1.3 times less risky than Mundial SA. The preferred stock trades about -0.25 of its potential returns per unit of risk. The Mundial SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,650  in Mundial SA on September 17, 2024 and sell it today you would lose (2.00) from holding Mundial SA or give up 0.12% of portfolio value over 90 days.

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

Bombril SA  vs.  Mundial SA

Bombril SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombril SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bombril SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mundial SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mundial SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mundial SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bombril SA and Mundial SA

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

The idea behind Bombril SA and Mundial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.