Correlation Between Iochpe Maxion and Grendene

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

Diversification Opportunities for Iochpe Maxion and Grendene

0.11

Correlation Coefficient

Iochpe Maxion  Grendene

Average diversification

The 3 months correlation between Iochpe and Grendene is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Grendene SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grendene 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 Grendene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grendene SA has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Grendene go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Grendene

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 1.37 times more return on investment than Grendene. However, Iochpe Maxion is 1.37 times more volatile than Grendene SA. It trades about 0.1 of its potential returns per unit of risk. Grendene SA is currently generating about -0.08 per unit of risk. If you would invest  1,106  in Iochpe Maxion SA on September 13, 2024 and sell it today you would earn a total of  157.00  from holding Iochpe Maxion SA or generate 14.2% return on investment over 90 days.

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

Iochpe Maxion SA  vs.  Grendene SA

Iochpe Maxion SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 7 (%) 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.

Grendene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grendene SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Iochpe Maxion and Grendene

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

The idea behind Iochpe Maxion SA and Grendene 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.