Correlation Between Mundial SA and N1WL34

Can any of the company-specific risk be diversified away by investing in both Mundial SA and N1WL34 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 Mundial SA and N1WL34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mundial SA and N1WL34, you can compare the effects of market volatilities on Mundial SA and N1WL34 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 Mundial SA with a short position of N1WL34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mundial SA and N1WL34.

Diversification Opportunities for Mundial SA and N1WL34

0.54

Correlation Coefficient

Mundial SA  N1WL34

Very weak diversification

The 3 months correlation between Mundial and N1WL34 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mundial SA and N1WL34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N1WL34 and Mundial 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 Mundial SA are associated (or correlated) with N1WL34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N1WL34 has no effect on the direction of Mundial SA i.e., Mundial SA and N1WL34 go up and down completely randomly.

Pair Corralation between Mundial SA and N1WL34

Assuming the 90 days trading horizon Mundial SA is expected to generate 15.85 times more return on investment than N1WL34. However, Mundial SA is 15.85 times more volatile than N1WL34. It trades about 0.05 of its potential returns per unit of risk. N1WL34 is currently generating about 0.05 per unit of risk. If you would invest  1,407  in Mundial SA on September 26, 2024 and sell it today you would earn a total of  313.00  from holding Mundial SA or generate 22.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

Mundial SA   vs.  N1WL34

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.

N1WL34

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N1WL34 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N1WL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mundial SA and N1WL34

The main advantage of trading using opposite Mundial SA and N1WL34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mundial SA position performs unexpectedly, N1WL34 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 N1WL34 will offset losses from the drop in N1WL34's long position.

The idea behind Mundial SA and N1WL34 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.