Correlation Between Cable One and M Dias

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

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

Diversification Opportunities for Cable One and M Dias

-0.67

Correlation Coefficient

Cable One  M Dias

Excellent diversification

The 3 months correlation between Cable and MDIA3 is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and M Dias Branco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Dias Branco and Cable One 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 Cable One are associated (or correlated) with M Dias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Dias Branco has no effect on the direction of Cable One i.e., Cable One and M Dias go up and down completely randomly.

Pair Corralation between Cable One and M Dias

Assuming the 90 days trading horizon Cable One is expected to under-perform the M Dias. In addition to that, Cable One is 1.37 times more volatile than M Dias Branco. It trades about -0.03 of its total potential returns per unit of risk. M Dias Branco is currently generating about -0.03 per unit of volatility. If you would invest  3,423  in M Dias Branco on September 23, 2024 and sell it today you would lose (1,358) from holding M Dias Branco or give up 39.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.93%
Values	Daily Returns

Cable One  vs.  M Dias Branco

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

M Dias Branco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Dias Branco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cable One and M Dias

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

The idea behind Cable One and M Dias Branco 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.