Correlation Between Fondo Mutuo and CAP SA

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

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

Diversification Opportunities for Fondo Mutuo and CAP SA

-0.26

Correlation Coefficient

Fondo Mutuo  CAP SA

Very good diversification

The 3 months correlation between Fondo and CAP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fondo Mutuo ETF and CAP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP SA and Fondo Mutuo 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 Fondo Mutuo ETF are associated (or correlated) with CAP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP SA has no effect on the direction of Fondo Mutuo i.e., Fondo Mutuo and CAP SA go up and down completely randomly.

Pair Corralation between Fondo Mutuo and CAP SA

Assuming the 90 days trading horizon Fondo Mutuo ETF is expected to generate 0.6 times more return on investment than CAP SA. However, Fondo Mutuo ETF is 1.66 times less risky than CAP SA. It trades about 0.29 of its potential returns per unit of risk. CAP SA is currently generating about -0.01 per unit of risk. If you would invest  135,937  in Fondo Mutuo ETF on December 1, 2024 and sell it today you would earn a total of  15,943  from holding Fondo Mutuo ETF or generate 11.73% return on investment over 90 days.

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

Fondo Mutuo ETF  vs.  CAP SA

Fondo Mutuo ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fondo Mutuo ETF are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Fondo Mutuo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CAP SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fondo Mutuo and CAP SA

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

The idea behind Fondo Mutuo ETF and CAP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.