Correlation Between Iochpe Maxion and Indstrias Romi

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

Diversification Opportunities for Iochpe Maxion and Indstrias Romi

-0.76

Correlation Coefficient

Iochpe Maxion  Indstrias Romi

Pay attention - limited upside

The 3 months correlation between Iochpe and Indstrias is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Indstrias Romi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indstrias Romi 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 Indstrias Romi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indstrias Romi SA has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Indstrias Romi go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Indstrias Romi

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 1.08 times more return on investment than Indstrias Romi. However, Iochpe Maxion is 1.08 times more volatile than Indstrias Romi SA. It trades about 0.02 of its potential returns per unit of risk. Indstrias Romi SA is currently generating about -0.02 per unit of risk. If you would invest  995.00  in Iochpe Maxion SA on October 4, 2024 and sell it today you would earn a total of  133.00  from holding Iochpe Maxion SA or generate 13.37% return on investment over 90 days.

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

Iochpe Maxion SA  vs.  Indstrias Romi SA

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.

Indstrias Romi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indstrias Romi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Iochpe Maxion and Indstrias Romi

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

The idea behind Iochpe Maxion SA and Indstrias Romi 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.