Correlation Between S1YM34 and TRX Renda

Can any of the company-specific risk be diversified away by investing in both S1YM34 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 S1YM34 and TRX Renda into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between S1YM34 and TRX Renda Fundo, you can compare the effects of market volatilities on S1YM34 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 S1YM34 with a short position of TRX Renda. Check out your portfolio center. Please also check ongoing floating volatility patterns of S1YM34 and TRX Renda.

Diversification Opportunities for S1YM34 and TRX Renda

-0.52

Correlation Coefficient

S1YM34  TRX Renda

Excellent diversification

The 3 months correlation between S1YM34 and TRX is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding S1YM34 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 S1YM34 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 S1YM34 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 S1YM34 i.e., S1YM34 and TRX Renda go up and down completely randomly.

Pair Corralation between S1YM34 and TRX Renda

Assuming the 90 days trading horizon S1YM34 is expected to generate 3.02 times more return on investment than TRX Renda. However, S1YM34 is 3.02 times more volatile than TRX Renda Fundo. It trades about 0.15 of its potential returns per unit of risk. TRX Renda Fundo is currently generating about -0.01 per unit of risk. If you would invest  13,472  in S1YM34 on September 26, 2024 and sell it today you would earn a total of  4,421  from holding S1YM34 or generate 32.82% return on investment over 90 days.

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

S1YM34  vs.  TRX Renda Fundo

S1YM34

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in S1YM34 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, S1YM34 sustained solid returns over the last few months and may actually be approaching a breakup point.

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 S1YM34 and TRX Renda

The main advantage of trading using opposite S1YM34 and TRX Renda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S1YM34 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 S1YM34 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..