Correlation Between KMBB34 and Mundial SA

Can any of the company-specific risk be diversified away by investing in both KMBB34 and Mundial 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 KMBB34 and Mundial SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KMBB34 and Mundial SA , you can compare the effects of market volatilities on KMBB34 and Mundial 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 KMBB34 with a short position of Mundial SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMBB34 and Mundial SA.

Diversification Opportunities for KMBB34 and Mundial SA

0.67

Correlation Coefficient

KMBB34  Mundial SA

Poor diversification

The 3 months correlation between KMBB34 and Mundial is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KMBB34 and Mundial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundial SA and KMBB34 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 KMBB34 are associated (or correlated) with Mundial SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mundial SA has no effect on the direction of KMBB34 i.e., KMBB34 and Mundial SA go up and down completely randomly.

Pair Corralation between KMBB34 and Mundial SA

Assuming the 90 days trading horizon KMBB34 is expected to generate 96.7 times less return on investment than Mundial SA. But when comparing it to its historical volatility, KMBB34 is 50.9 times less risky than Mundial SA. It trades about 0.03 of its potential returns per unit of risk. Mundial SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  996.00  in Mundial SA on September 26, 2024 and sell it today you would earn a total of  724.00  from holding Mundial SA or generate 72.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

KMBB34  vs.  Mundial SA

KMBB34

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMBB34 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, KMBB34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mundial SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mundial SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mundial SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KMBB34 and Mundial SA

The main advantage of trading using opposite KMBB34 and Mundial SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMBB34 position performs unexpectedly, Mundial 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 Mundial SA will offset losses from the drop in Mundial SA's long position.

The idea behind KMBB34 and Mundial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.