Correlation Between Iochpe Maxion and Plexus Corp

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

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

Diversification Opportunities for Iochpe Maxion and Plexus Corp

0.75

Correlation Coefficient

Iochpe Maxion  Plexus Corp

Poor diversification

The 3 months correlation between Iochpe and Plexus is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp and Iochpe Maxion 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 Iochpe Maxion SA are associated (or correlated) with Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Plexus Corp go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Plexus Corp

Assuming the 90 days horizon Iochpe Maxion SA is expected to generate 2.81 times more return on investment than Plexus Corp. However, Iochpe Maxion is 2.81 times more volatile than Plexus Corp. It trades about 0.04 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.05 per unit of risk. If you would invest  82.00  in Iochpe Maxion SA on October 11, 2024 and sell it today you would earn a total of  18.00  from holding Iochpe Maxion SA or generate 21.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	58.79%
Values	Daily Returns

Iochpe Maxion SA  vs.  Plexus Corp

Iochpe Maxion SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iochpe Maxion SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Iochpe Maxion is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Plexus Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iochpe Maxion and Plexus Corp

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

The idea behind Iochpe Maxion SA and Plexus Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.