Correlation Between Bresco Fundo and FDO INV

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

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

Diversification Opportunities for Bresco Fundo and FDO INV

-0.12

Correlation Coefficient

Bresco Fundo  FDO INV

Good diversification

The 3 months correlation between Bresco and FDO is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bresco Fundo 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 Bresco Fundo 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 Bresco Fundo 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 Bresco Fundo i.e., Bresco Fundo and FDO INV go up and down completely randomly.

Pair Corralation between Bresco Fundo and FDO INV

Assuming the 90 days trading horizon Bresco Fundo is expected to generate 1.03 times less return on investment than FDO INV. But when comparing it to its historical volatility, Bresco Fundo is 4.3 times less risky than FDO INV. It trades about 0.09 of its potential returns per unit of risk. FDO INV IMOB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,267  in FDO INV IMOB on December 30, 2024 and sell it today you would earn a total of  2.00  from holding FDO INV IMOB or generate 0.02% return on investment over 90 days.

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

Bresco Fundo  vs.  FDO INV IMOB

Bresco Fundo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bresco Fundo are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Bresco Fundo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FDO INV IMOB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental 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 Bresco Fundo and FDO INV

The main advantage of trading using opposite Bresco Fundo and FDO INV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bresco Fundo 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 Bresco Fundo 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.