Correlation Between Metalrgica Riosulense and Alupar Investimento

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

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

Diversification Opportunities for Metalrgica Riosulense and Alupar Investimento

0.66

Correlation Coefficient

Metalrgica Riosulense  Alupar Investimento

Poor diversification

The 3 months correlation between Metalrgica and Alupar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and Alupar Investimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alupar Investimento and Metalrgica Riosulense 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 Metalrgica Riosulense SA are associated (or correlated) with Alupar Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alupar Investimento has no effect on the direction of Metalrgica Riosulense i.e., Metalrgica Riosulense and Alupar Investimento go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and Alupar Investimento

Assuming the 90 days trading horizon Metalrgica Riosulense SA is expected to generate 1.03 times more return on investment than Alupar Investimento. However, Metalrgica Riosulense is 1.03 times more volatile than Alupar Investimento SA. It trades about 0.24 of its potential returns per unit of risk. Alupar Investimento SA is currently generating about 0.0 per unit of risk. If you would invest  5,499  in Metalrgica Riosulense SA on December 2, 2024 and sell it today you would earn a total of  1,301  from holding Metalrgica Riosulense SA or generate 23.66% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  Alupar Investimento SA

Metalrgica Riosulense

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metalrgica Riosulense SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalrgica Riosulense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alupar Investimento

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Metalrgica Riosulense and Alupar Investimento

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

The idea behind Metalrgica Riosulense SA and Alupar Investimento 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.