Correlation Between CA Modas and Multilaser Industrial

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

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

Diversification Opportunities for CA Modas and Multilaser Industrial

-0.4

Correlation Coefficient

CA Modas  Multilaser Industrial

Very good diversification

The 3 months correlation between CEAB3 and Multilaser is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CA Modas SA and Multilaser Industrial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multilaser Industrial and CA Modas 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 CA Modas SA are associated (or correlated) with Multilaser Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multilaser Industrial has no effect on the direction of CA Modas i.e., CA Modas and Multilaser Industrial go up and down completely randomly.

Pair Corralation between CA Modas and Multilaser Industrial

Assuming the 90 days trading horizon CA Modas SA is expected to generate 1.17 times more return on investment than Multilaser Industrial. However, CA Modas is 1.17 times more volatile than Multilaser Industrial SA. It trades about 0.05 of its potential returns per unit of risk. Multilaser Industrial SA is currently generating about -0.18 per unit of risk. If you would invest  975.00  in CA Modas SA on September 1, 2024 and sell it today you would earn a total of  82.00  from holding CA Modas SA or generate 8.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

CA Modas SA  vs.  Multilaser Industrial SA

CA Modas SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CA Modas SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CA Modas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Multilaser Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multilaser Industrial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CA Modas and Multilaser Industrial

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

The idea behind CA Modas SA and Multilaser Industrial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.