Correlation Between Weg ADM and MBI Administradora

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

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

Diversification Opportunities for Weg ADM and MBI Administradora

-0.61

Correlation Coefficient

Weg ADM  MBI Administradora

Excellent diversification

The 3 months correlation between Weg and MBI is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Weg ADM General and MBI Administradora General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBI Administradora and Weg ADM 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 Weg ADM General are associated (or correlated) with MBI Administradora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBI Administradora has no effect on the direction of Weg ADM i.e., Weg ADM and MBI Administradora go up and down completely randomly.

Pair Corralation between Weg ADM and MBI Administradora

If you would invest  127,244  in Weg ADM General on October 25, 2024 and sell it today you would earn a total of  12,756  from holding Weg ADM General or generate 10.02% return on investment over 90 days.

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

Weg ADM General  vs.  MBI Administradora General

Weg ADM General

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weg ADM General has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Weg ADM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 fragile basic indicators, MBI Administradora may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Weg ADM and MBI Administradora

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

The idea behind Weg ADM General and MBI Administradora General 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 Stocks Directory module to find actively traded stocks across global markets.