Correlation Between Iochpe Maxion and Valid Solues

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

Diversification Opportunities for Iochpe Maxion and Valid Solues

0.21

Correlation Coefficient

Iochpe Maxion  Valid Solues

Modest diversification

The 3 months correlation between Iochpe and Valid is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Iochpe Maxion SA and Valid Solues SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valid Solues 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 Valid Solues. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valid Solues SA has no effect on the direction of Iochpe Maxion i.e., Iochpe Maxion and Valid Solues go up and down completely randomly.

Pair Corralation between Iochpe Maxion and Valid Solues

Assuming the 90 days trading horizon Iochpe Maxion SA is expected to generate 0.63 times more return on investment than Valid Solues. However, Iochpe Maxion SA is 1.59 times less risky than Valid Solues. It trades about 0.05 of its potential returns per unit of risk. Valid Solues SA is currently generating about 0.03 per unit of risk. If you would invest  1,111  in Iochpe Maxion SA on December 30, 2024 and sell it today you would earn a total of  64.00  from holding Iochpe Maxion SA or generate 5.76% return on investment over 90 days.

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

Iochpe Maxion SA  vs.  Valid Solues SA

Iochpe Maxion SA

Risk-Adjusted Performance

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 April 2025.

Valid Solues SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valid Solues SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Valid Solues may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Iochpe Maxion and Valid Solues

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

The idea behind Iochpe Maxion SA and Valid Solues 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.