Correlation Between REAL INVESTOR and Hedge Aaa

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

By analyzing existing cross correlation between REAL INVESTOR FUNDO and Hedge Aaa Fundo, you can compare the effects of market volatilities on REAL INVESTOR and Hedge Aaa 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 REAL INVESTOR with a short position of Hedge Aaa. Check out your portfolio center. Please also check ongoing floating volatility patterns of REAL INVESTOR and Hedge Aaa.

Diversification Opportunities for REAL INVESTOR and Hedge Aaa

0.72

Correlation Coefficient

REAL INVESTOR  Hedge Aaa

Poor diversification

The 3 months correlation between REAL and Hedge is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding REAL INVESTOR FUNDO and Hedge Aaa Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hedge Aaa Fundo and REAL INVESTOR 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 REAL INVESTOR FUNDO are associated (or correlated) with Hedge Aaa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hedge Aaa Fundo has no effect on the direction of REAL INVESTOR i.e., REAL INVESTOR and Hedge Aaa go up and down completely randomly.

Pair Corralation between REAL INVESTOR and Hedge Aaa

Assuming the 90 days trading horizon REAL INVESTOR FUNDO is expected to generate 0.35 times more return on investment than Hedge Aaa. However, REAL INVESTOR FUNDO is 2.85 times less risky than Hedge Aaa. It trades about -0.04 of its potential returns per unit of risk. Hedge Aaa Fundo is currently generating about -0.09 per unit of risk. If you would invest  10,233  in REAL INVESTOR FUNDO on December 4, 2024 and sell it today you would lose (478.00) from holding REAL INVESTOR FUNDO or give up 4.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

REAL INVESTOR FUNDO  vs.  Hedge Aaa Fundo

REAL INVESTOR FUNDO

Risk-Adjusted Performance

Very Weak

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

Hedge Aaa Fundo

Risk-Adjusted Performance

Very Weak

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

Pair Trading with REAL INVESTOR and Hedge Aaa

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

The idea behind REAL INVESTOR FUNDO and Hedge Aaa 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.