Correlation Between MBI Administradora and Salfacorp

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

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

Diversification Opportunities for MBI Administradora and Salfacorp

-0.79

Correlation Coefficient

MBI Administradora  Salfacorp

Pay attention - limited upside

The 3 months correlation between MBI and Salfacorp is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding MBI Administradora General and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and MBI Administradora 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 MBI Administradora General are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of MBI Administradora i.e., MBI Administradora and Salfacorp go up and down completely randomly.

Pair Corralation between MBI Administradora and Salfacorp

Assuming the 90 days trading horizon MBI Administradora General is expected to generate 1.0 times more return on investment than Salfacorp. However, MBI Administradora General is 1.0 times less risky than Salfacorp. It trades about 0.13 of its potential returns per unit of risk. Salfacorp is currently generating about -0.09 per unit of risk. If you would invest  2,467,984  in MBI Administradora General on October 24, 2024 and sell it today you would earn a total of  167,020  from holding MBI Administradora General or generate 6.77% return on investment over 90 days.

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

MBI Administradora General  vs.  Salfacorp

MBI Administradora

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MBI Administradora General are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively uncertain basic indicators, MBI Administradora may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Salfacorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salfacorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Salfacorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MBI Administradora and Salfacorp

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

The idea behind MBI Administradora General and Salfacorp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.