Correlation Between Empresa Metropolitana and Alupar Investimento

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

By analyzing existing cross correlation between Empresa Metropolitana de and Alupar Investimento SA, you can compare the effects of market volatilities on Empresa Metropolitana and Alupar Investimento 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 Empresa Metropolitana with a short position of Alupar Investimento. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresa Metropolitana and Alupar Investimento.

Diversification Opportunities for Empresa Metropolitana and Alupar Investimento

0.48

Correlation Coefficient

Empresa Metropolitana  Alupar Investimento

Very weak diversification

The 3 months correlation between Empresa and Alupar is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Metropolitana de and Alupar Investimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alupar Investimento and Empresa Metropolitana 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 Empresa Metropolitana de are associated (or correlated) with Alupar Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alupar Investimento has no effect on the direction of Empresa Metropolitana i.e., Empresa Metropolitana and Alupar Investimento go up and down completely randomly.

Pair Corralation between Empresa Metropolitana and Alupar Investimento

Assuming the 90 days trading horizon Empresa Metropolitana de is expected to under-perform the Alupar Investimento. In addition to that, Empresa Metropolitana is 1.09 times more volatile than Alupar Investimento SA. It trades about -0.06 of its total potential returns per unit of risk. Alupar Investimento SA is currently generating about -0.06 per unit of volatility. If you would invest  2,817  in Alupar Investimento SA on December 4, 2024 and sell it today you would lose (56.00) from holding Alupar Investimento SA or give up 1.99% of portfolio value over 90 days.

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

Empresa Metropolitana de  vs.  Alupar Investimento SA

Empresa Metropolitana

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Metropolitana de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Empresa Metropolitana may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alupar Investimento

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alupar Investimento SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alupar Investimento is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Empresa Metropolitana and Alupar Investimento

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

The idea behind Empresa Metropolitana de and Alupar Investimento 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.