Correlation Between METISA Metalrgica and Iochpe Maxion

Can any of the company-specific risk be diversified away by investing in both METISA Metalrgica and Iochpe Maxion 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 Iochpe Maxion 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 Iochpe Maxion SA, you can compare the effects of market volatilities on METISA Metalrgica and Iochpe Maxion 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 Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of METISA Metalrgica and Iochpe Maxion.

Diversification Opportunities for METISA Metalrgica and Iochpe Maxion

-0.26

Correlation Coefficient

METISA Metalrgica  Iochpe Maxion

Very good diversification

The 3 months correlation between METISA and Iochpe is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense and Iochpe Maxion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iochpe Maxion SA 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 Iochpe Maxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iochpe Maxion SA has no effect on the direction of METISA Metalrgica i.e., METISA Metalrgica and Iochpe Maxion go up and down completely randomly.

Pair Corralation between METISA Metalrgica and Iochpe Maxion

Assuming the 90 days trading horizon METISA Metalrgica is expected to generate 1.18 times less return on investment than Iochpe Maxion. In addition to that, METISA Metalrgica is 1.04 times more volatile than Iochpe Maxion SA. It trades about 0.05 of its total potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.06 per unit of volatility. If you would invest  1,037  in Iochpe Maxion SA on October 6, 2024 and sell it today you would earn a total of  71.00  from holding Iochpe Maxion SA or generate 6.85% return on investment over 90 days.

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

METISA Metalrgica Timboense  vs.  Iochpe Maxion SA

METISA Metalrgica

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, METISA Metalrgica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Iochpe Maxion SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Iochpe Maxion may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with METISA Metalrgica and Iochpe Maxion

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

The idea behind METISA Metalrgica Timboense and Iochpe Maxion 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.