Correlation Between Cia De and Fras Le

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

By analyzing existing cross correlation between Cia de Ferro and Fras le SA, you can compare the effects of market volatilities on Cia De and Fras Le 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 Cia De with a short position of Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cia De and Fras Le.

Diversification Opportunities for Cia De and Fras Le

-0.6

Correlation Coefficient

Cia De  Fras Le

Excellent diversification

The 3 months correlation between Cia and Fras is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Ferro and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA and Cia De 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 Cia de Ferro are associated (or correlated) with Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Cia De i.e., Cia De and Fras Le go up and down completely randomly.

Pair Corralation between Cia De and Fras Le

Assuming the 90 days trading horizon Cia De is expected to generate 3.14 times less return on investment than Fras Le. In addition to that, Cia De is 1.36 times more volatile than Fras le SA. It trades about 0.02 of its total potential returns per unit of risk. Fras le SA is currently generating about 0.07 per unit of volatility. If you would invest  2,041  in Fras le SA on September 13, 2024 and sell it today you would earn a total of  119.00  from holding Fras le SA or generate 5.83% return on investment over 90 days.

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

Cia de Ferro  vs.  Fras le SA

Cia de Ferro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cia de Ferro are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cia De is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fras le SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fras Le may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cia De and Fras Le

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

The idea behind Cia de Ferro and Fras le 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.