Correlation Between Iproeb SA and SCUT SA

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

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

Diversification Opportunities for Iproeb SA and SCUT SA

0.29

Correlation Coefficient

Iproeb SA  SCUT SA

Modest diversification

The 3 months correlation between Iproeb and SCUT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Iproeb SA and SCUT SA BACAU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCUT SA BACAU and Iproeb SA 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 Iproeb SA are associated (or correlated) with SCUT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCUT SA BACAU has no effect on the direction of Iproeb SA i.e., Iproeb SA and SCUT SA go up and down completely randomly.

Pair Corralation between Iproeb SA and SCUT SA

Assuming the 90 days trading horizon Iproeb SA is expected to under-perform the SCUT SA. But the stock apears to be less risky and, when comparing its historical volatility, Iproeb SA is 3.9 times less risky than SCUT SA. The stock trades about -0.14 of its potential returns per unit of risk. The SCUT SA BACAU is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,360  in SCUT SA BACAU on October 22, 2024 and sell it today you would earn a total of  640.00  from holding SCUT SA BACAU or generate 27.12% return on investment over 90 days.

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

Iproeb SA  vs.  SCUT SA BACAU

Iproeb SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iproeb SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

SCUT SA BACAU

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days SCUT SA BACAU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, SCUT SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iproeb SA and SCUT SA

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

The idea behind Iproeb SA and SCUT SA BACAU 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.