Correlation Between METISA Metalrgica and Alupar Investimento

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

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

Diversification Opportunities for METISA Metalrgica and Alupar Investimento

0.66

Correlation Coefficient

METISA Metalrgica  Alupar Investimento

Poor diversification

The 3 months correlation between METISA and Alupar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense and Alupar Investimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alupar Investimento and METISA Metalrgica 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 METISA Metalrgica Timboense are associated (or correlated) with Alupar Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alupar Investimento has no effect on the direction of METISA Metalrgica i.e., METISA Metalrgica and Alupar Investimento go up and down completely randomly.

Pair Corralation between METISA Metalrgica and Alupar Investimento

Assuming the 90 days trading horizon METISA Metalrgica Timboense is expected to generate 0.95 times more return on investment than Alupar Investimento. However, METISA Metalrgica Timboense is 1.05 times less risky than Alupar Investimento. It trades about 0.17 of its potential returns per unit of risk. Alupar Investimento SA is currently generating about 0.13 per unit of risk. If you would invest  3,651  in METISA Metalrgica Timboense on December 23, 2024 and sell it today you would earn a total of  543.00  from holding METISA Metalrgica Timboense or generate 14.87% return on investment over 90 days.

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

METISA Metalrgica Timboense  vs.  Alupar Investimento SA

METISA Metalrgica

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alupar Investimento

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alupar Investimento SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alupar Investimento may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with METISA Metalrgica and Alupar Investimento

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

The idea behind METISA Metalrgica Timboense and Alupar Investimento 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.