Correlation Between Plexus Corp and Iochpe Maxion

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

By analyzing existing cross correlation between Plexus Corp and Iochpe Maxion SA, you can compare the effects of market volatilities on Plexus Corp and Iochpe Maxion 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 Plexus Corp with a short position of Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plexus Corp and Iochpe Maxion.

Diversification Opportunities for Plexus Corp and Iochpe Maxion

0.75

Correlation Coefficient

Plexus Corp  Iochpe Maxion

Poor diversification

The 3 months correlation between Plexus and Iochpe is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and Iochpe Maxion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iochpe Maxion SA and Plexus Corp 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 Plexus Corp are associated (or correlated) with Iochpe Maxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iochpe Maxion SA has no effect on the direction of Plexus Corp i.e., Plexus Corp and Iochpe Maxion go up and down completely randomly.

Pair Corralation between Plexus Corp and Iochpe Maxion

Given the investment horizon of 90 days Plexus Corp is expected to generate 2.2 times less return on investment than Iochpe Maxion. But when comparing it to its historical volatility, Plexus Corp is 2.81 times less risky than Iochpe Maxion. It trades about 0.05 of its potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Iochpe Maxion SA on October 11, 2024 and sell it today you would earn a total of  18.00  from holding Iochpe Maxion SA or generate 21.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	58.67%
Values	Daily Returns

Plexus Corp  vs.  Iochpe Maxion SA

Plexus Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Iochpe Maxion SA

Risk-Adjusted Performance

0 of 100

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 fairly strong forward-looking indicators, Iochpe Maxion is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Plexus Corp and Iochpe Maxion

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

The idea behind Plexus Corp and Iochpe Maxion 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.