Correlation Between METISA Metalrgica and Technos SA

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

Diversification Opportunities for METISA Metalrgica and Technos SA

-0.09

Correlation Coefficient

METISA Metalrgica  Technos SA

Good diversification

The 3 months correlation between METISA and Technos is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding METISA Metalrgica Timboense and Technos SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technos 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 Technos SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technos SA has no effect on the direction of METISA Metalrgica i.e., METISA Metalrgica and Technos SA go up and down completely randomly.

Pair Corralation between METISA Metalrgica and Technos SA

Assuming the 90 days trading horizon METISA Metalrgica Timboense is expected to generate 0.67 times more return on investment than Technos SA. However, METISA Metalrgica Timboense is 1.49 times less risky than Technos SA. It trades about 0.33 of its potential returns per unit of risk. Technos SA is currently generating about 0.05 per unit of risk. If you would invest  3,419  in METISA Metalrgica Timboense on October 12, 2024 and sell it today you would earn a total of  406.00  from holding METISA Metalrgica Timboense or generate 11.87% 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.  Technos SA

METISA Metalrgica

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in METISA Metalrgica Timboense are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, METISA Metalrgica is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Technos SA

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with METISA Metalrgica and Technos SA

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

The idea behind METISA Metalrgica Timboense and Technos 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.