Correlation Between FDO INV and TRX Renda

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

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

Diversification Opportunities for FDO INV and TRX Renda

0.56

Correlation Coefficient

FDO INV  TRX Renda

Very weak diversification

The 3 months correlation between FDO and TRX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV IMOB and TRX Renda Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRX Renda Fundo and FDO INV 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 FDO INV IMOB are associated (or correlated) with TRX Renda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRX Renda Fundo has no effect on the direction of FDO INV i.e., FDO INV and TRX Renda go up and down completely randomly.

Pair Corralation between FDO INV and TRX Renda

Assuming the 90 days trading horizon FDO INV is expected to generate 5.58 times less return on investment than TRX Renda. But when comparing it to its historical volatility, FDO INV IMOB is 5.43 times less risky than TRX Renda. It trades about 0.22 of its potential returns per unit of risk. TRX Renda Fundo is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,776  in TRX Renda Fundo on December 5, 2024 and sell it today you would earn a total of  346.00  from holding TRX Renda Fundo or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

FDO INV IMOB  vs.  TRX Renda Fundo

FDO INV IMOB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TRX Renda Fundo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRX Renda Fundo are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, TRX Renda sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FDO INV and TRX Renda

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

The idea behind FDO INV IMOB and TRX Renda Fundo 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.