Correlation Between MPM Corpreos and Cruzeiro

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

By analyzing existing cross correlation between MPM Corpreos SA and Cruzeiro do Sul, you can compare the effects of market volatilities on MPM Corpreos and Cruzeiro 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 MPM Corpreos with a short position of Cruzeiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPM Corpreos and Cruzeiro.

Diversification Opportunities for MPM Corpreos and Cruzeiro

0.49

Correlation Coefficient

MPM Corpreos  Cruzeiro

Very weak diversification

The 3 months correlation between MPM and Cruzeiro is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MPM Corpreos SA and Cruzeiro do Sul in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cruzeiro do Sul and MPM Corpreos 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 MPM Corpreos SA are associated (or correlated) with Cruzeiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cruzeiro do Sul has no effect on the direction of MPM Corpreos i.e., MPM Corpreos and Cruzeiro go up and down completely randomly.

Pair Corralation between MPM Corpreos and Cruzeiro

Assuming the 90 days trading horizon MPM Corpreos SA is expected to under-perform the Cruzeiro. But the stock apears to be less risky and, when comparing its historical volatility, MPM Corpreos SA is 2.16 times less risky than Cruzeiro. The stock trades about -0.28 of its potential returns per unit of risk. The Cruzeiro do Sul is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  335.00  in Cruzeiro do Sul on September 29, 2024 and sell it today you would lose (24.00) from holding Cruzeiro do Sul or give up 7.16% of portfolio value over 90 days.

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

MPM Corpreos SA  vs.  Cruzeiro do Sul

MPM Corpreos SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPM Corpreos 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cruzeiro do Sul

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cruzeiro do Sul has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cruzeiro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MPM Corpreos and Cruzeiro

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

The idea behind MPM Corpreos SA and Cruzeiro do Sul 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.

Check out your portfolio center.

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.