Correlation Between Iochpe Maxion and Tecnisa SA

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

Diversification Opportunities for Iochpe Maxion and Tecnisa SA

0.83

Correlation Coefficient

Iochpe Maxion  Tecnisa SA

Very poor diversification

The 3 months correlation between Iochpe and Tecnisa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Tecnisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnisa 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 Tecnisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnisa SA has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Tecnisa SA go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Tecnisa SA

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 0.79 times more return on investment than Tecnisa SA. However, Iochpe Maxion SA is 1.27 times less risky than Tecnisa SA. It trades about 0.06 of its potential returns per unit of risk. Tecnisa SA is currently generating about -0.09 per unit of risk. If you would invest  1,114  in Iochpe Maxion SA on December 5, 2024 and sell it today you would earn a total of  160.00  from holding Iochpe Maxion SA or generate 14.36% return on investment over 90 days.

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

Iochpe Maxion SA  vs.  Tecnisa SA

Iochpe Maxion SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iochpe Maxion SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Iochpe Maxion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Tecnisa SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tecnisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tecnisa SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Iochpe Maxion and Tecnisa SA

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

The idea behind Iochpe Maxion SA and Tecnisa 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.