Correlation Between M Dias and Mundial SA

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

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

Diversification Opportunities for M Dias and Mundial SA

-0.7

Correlation Coefficient

M Dias  Mundial SA

Excellent diversification

The 3 months correlation between MDIA3 and Mundial is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding M Dias Branco and Mundial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mundial SA and M Dias 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 M Dias Branco 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 M Dias i.e., M Dias and Mundial SA go up and down completely randomly.

Pair Corralation between M Dias and Mundial SA

Assuming the 90 days trading horizon M Dias Branco is expected to under-perform the Mundial SA. In addition to that, M Dias is 1.0 times more volatile than Mundial SA . It trades about -0.22 of its total potential returns per unit of risk. Mundial SA is currently generating about 0.01 per unit of volatility. If you would invest  1,650  in Mundial SA on September 16, 2024 and sell it today you would lose (2.00) from holding Mundial SA or give up 0.12% of portfolio value over 90 days.

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

M Dias Branco  vs.  Mundial SA

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.

Mundial SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mundial SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mundial SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with M Dias and Mundial SA

The main advantage of trading using opposite M Dias and Mundial SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Dias 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 M Dias Branco 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.