Correlation Between Basic Materials and Inepar SA

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

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

Diversification Opportunities for Basic Materials and Inepar SA

-0.44

Correlation Coefficient

Basic Materials  Inepar SA

Very good diversification

The 3 months correlation between Basic and Inepar is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria and Basic Materials 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 Basic Materials are associated (or correlated) with Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of Basic Materials i.e., Basic Materials and Inepar SA go up and down completely randomly.

Pair Corralation between Basic Materials and Inepar SA

Assuming the 90 days trading horizon Basic Materials is expected to generate 2.37 times less return on investment than Inepar SA. But when comparing it to its historical volatility, Basic Materials is 2.28 times less risky than Inepar SA. It trades about 0.1 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Inepar SA Indstria on September 15, 2024 and sell it today you would earn a total of  7.00  from holding Inepar SA Indstria or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Basic Materials  vs.  Inepar SA Indstria

Pair Trading with Basic Materials and Inepar SA

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

The idea behind Basic Materials and Inepar SA Indstria 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.