Correlation Between Nu Renda and TRX Renda

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

By analyzing existing cross correlation between Nu Renda Ibov and TRX Renda Fundo, you can compare the effects of market volatilities on Nu Renda and TRX Renda 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 Nu Renda with a short position of TRX Renda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Renda and TRX Renda.

Diversification Opportunities for Nu Renda and TRX Renda

0.3

Correlation Coefficient

Nu Renda  TRX Renda

Weak diversification

The 3 months correlation between NDIV11 and TRX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nu Renda Ibov and TRX Renda Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRX Renda Fundo and Nu Renda 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 Nu Renda Ibov are associated (or correlated) with TRX Renda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRX Renda Fundo has no effect on the direction of Nu Renda i.e., Nu Renda and TRX Renda go up and down completely randomly.

Pair Corralation between Nu Renda and TRX Renda

Assuming the 90 days trading horizon Nu Renda Ibov is expected to under-perform the TRX Renda. But the fund apears to be less risky and, when comparing its historical volatility, Nu Renda Ibov is 1.24 times less risky than TRX Renda. The fund trades about -0.18 of its potential returns per unit of risk. The TRX Renda Fundo is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,376  in TRX Renda Fundo on September 30, 2024 and sell it today you would lose (198.00) from holding TRX Renda Fundo or give up 1.91% of portfolio value over 90 days.

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

Nu Renda Ibov  vs.  TRX Renda Fundo

Nu Renda Ibov

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nu Renda Ibov has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

TRX Renda Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRX Renda Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, TRX Renda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nu Renda and TRX Renda

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

The idea behind Nu Renda Ibov and TRX Renda Fundo 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.