Correlation Between Multilaser Industrial and Smartfit Escola

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

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

Diversification Opportunities for Multilaser Industrial and Smartfit Escola

0.92

Correlation Coefficient

Multilaser Industrial  Smartfit Escola

Almost no diversification

The 3 months correlation between Multilaser and Smartfit is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Multilaser Industrial SA and Smartfit Escola de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smartfit Escola de and Multilaser Industrial 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 Multilaser Industrial SA are associated (or correlated) with Smartfit Escola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smartfit Escola de has no effect on the direction of Multilaser Industrial i.e., Multilaser Industrial and Smartfit Escola go up and down completely randomly.

Pair Corralation between Multilaser Industrial and Smartfit Escola

Assuming the 90 days trading horizon Multilaser Industrial SA is expected to under-perform the Smartfit Escola. In addition to that, Multilaser Industrial is 1.61 times more volatile than Smartfit Escola de. It trades about -0.18 of its total potential returns per unit of risk. Smartfit Escola de is currently generating about -0.13 per unit of volatility. If you would invest  2,246  in Smartfit Escola de on September 17, 2024 and sell it today you would lose (391.00) from holding Smartfit Escola de or give up 17.41% of portfolio value over 90 days.

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

Multilaser Industrial SA  vs.  Smartfit Escola de

Multilaser Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multilaser Industrial SA 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.

Smartfit Escola de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smartfit Escola de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 Multilaser Industrial and Smartfit Escola

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

The idea behind Multilaser Industrial SA and Smartfit Escola de 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.