Correlation Between Iochpe Maxion and Grazziotin

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

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

Diversification Opportunities for Iochpe Maxion and Grazziotin

0.59

Correlation Coefficient

Iochpe Maxion  Grazziotin

Very weak diversification

The 3 months correlation between Iochpe and Grazziotin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Grazziotin SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grazziotin SA and Iochpe Maxion 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 Iochpe Maxion SA are associated (or correlated) with Grazziotin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grazziotin SA has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Grazziotin go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Grazziotin

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 1.19 times more return on investment than Grazziotin. However, Iochpe Maxion is 1.19 times more volatile than Grazziotin SA. It trades about 0.19 of its potential returns per unit of risk. Grazziotin SA is currently generating about 0.15 per unit of risk. If you would invest  1,019  in Iochpe Maxion SA on October 20, 2024 and sell it today you would earn a total of  334.00  from holding Iochpe Maxion SA or generate 32.78% return on investment over 90 days.

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

Iochpe Maxion SA  vs.  Grazziotin SA

Iochpe Maxion SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Iochpe Maxion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Grazziotin SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grazziotin SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grazziotin unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iochpe Maxion and Grazziotin

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

The idea behind Iochpe Maxion SA and Grazziotin 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 Global Correlations module to find global opportunities by holding instruments from different markets.