Correlation Between HEDGE Brasil and Metalfrio Solutions

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

By analyzing existing cross correlation between HEDGE Brasil Shopping and Metalfrio Solutions SA, you can compare the effects of market volatilities on HEDGE Brasil and Metalfrio Solutions 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 HEDGE Brasil with a short position of Metalfrio Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEDGE Brasil and Metalfrio Solutions.

Diversification Opportunities for HEDGE Brasil and Metalfrio Solutions

-0.45

Correlation Coefficient

HEDGE Brasil  Metalfrio Solutions

Very good diversification

The 3 months correlation between HEDGE and Metalfrio is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and Metalfrio Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalfrio Solutions and HEDGE Brasil 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 HEDGE Brasil Shopping are associated (or correlated) with Metalfrio Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalfrio Solutions has no effect on the direction of HEDGE Brasil i.e., HEDGE Brasil and Metalfrio Solutions go up and down completely randomly.

Pair Corralation between HEDGE Brasil and Metalfrio Solutions

Assuming the 90 days trading horizon HEDGE Brasil Shopping is expected to under-perform the Metalfrio Solutions. But the fund apears to be less risky and, when comparing its historical volatility, HEDGE Brasil Shopping is 14.78 times less risky than Metalfrio Solutions. The fund trades about -0.2 of its potential returns per unit of risk. The Metalfrio Solutions SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  16,020  in Metalfrio Solutions SA on September 2, 2024 and sell it today you would lose (621.00) from holding Metalfrio Solutions SA or give up 3.88% of portfolio value over 90 days.

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

HEDGE Brasil Shopping  vs.  Metalfrio Solutions SA

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Metalfrio Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metalfrio Solutions SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalfrio Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEDGE Brasil and Metalfrio Solutions

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

The idea behind HEDGE Brasil Shopping and Metalfrio Solutions 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.