Correlation Between K1EL34 and M Dias

Can any of the company-specific risk be diversified away by investing in both K1EL34 and M Dias 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 K1EL34 and M Dias into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K1EL34 and M Dias Branco, you can compare the effects of market volatilities on K1EL34 and M Dias 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 K1EL34 with a short position of M Dias. Check out your portfolio center. Please also check ongoing floating volatility patterns of K1EL34 and M Dias.

Diversification Opportunities for K1EL34 and M Dias

-0.86

Correlation Coefficient

K1EL34  M Dias

Pay attention - limited upside

The 3 months correlation between K1EL34 and MDIA3 is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding K1EL34 and M Dias Branco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Dias Branco and K1EL34 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 K1EL34 are associated (or correlated) with M Dias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Dias Branco has no effect on the direction of K1EL34 i.e., K1EL34 and M Dias go up and down completely randomly.

Pair Corralation between K1EL34 and M Dias

Assuming the 90 days trading horizon K1EL34 is expected to generate 0.53 times more return on investment than M Dias. However, K1EL34 is 1.9 times less risky than M Dias. It trades about 0.17 of its potential returns per unit of risk. M Dias Branco is currently generating about -0.16 per unit of risk. If you would invest  22,869  in K1EL34 on September 26, 2024 and sell it today you would earn a total of  2,431  from holding K1EL34 or generate 10.63% return on investment over 90 days.

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

K1EL34  vs.  M Dias Branco

K1EL34

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K1EL34 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, K1EL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

M Dias Branco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Dias Branco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with K1EL34 and M Dias

The main advantage of trading using opposite K1EL34 and M Dias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K1EL34 position performs unexpectedly, M Dias 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 M Dias will offset losses from the drop in M Dias' long position.

The idea behind K1EL34 and M Dias Branco 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.