Correlation Between Metalrgica Riosulense and Lupatech

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

Diversification Opportunities for Metalrgica Riosulense and Lupatech

0.1

Correlation Coefficient

Metalrgica Riosulense  Lupatech

Average diversification

The 3 months correlation between Metalrgica and Lupatech is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and Lupatech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lupatech SA 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 Lupatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lupatech SA has no effect on the direction of Metalrgica Riosulense i.e., Metalrgica Riosulense and Lupatech go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and Lupatech

Assuming the 90 days trading horizon Metalrgica Riosulense SA is expected to generate 0.65 times more return on investment than Lupatech. However, Metalrgica Riosulense SA is 1.54 times less risky than Lupatech. It trades about 0.24 of its potential returns per unit of risk. Lupatech SA is currently generating about -0.03 per unit of risk. If you would invest  5,499  in Metalrgica Riosulense SA on December 1, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Metalrgica Riosulense SA  vs.  Lupatech 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.

Lupatech SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Metalrgica Riosulense and Lupatech

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

The idea behind Metalrgica Riosulense SA and Lupatech 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.