Correlation Between Schwager and MBI Administradora

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

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

Diversification Opportunities for Schwager and MBI Administradora

0.07

Correlation Coefficient

Schwager  MBI Administradora

Significant diversification

The 3 months correlation between Schwager and MBI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Schwager and MBI Administradora General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBI Administradora and Schwager 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 Schwager are associated (or correlated) with MBI Administradora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBI Administradora has no effect on the direction of Schwager i.e., Schwager and MBI Administradora go up and down completely randomly.

Pair Corralation between Schwager and MBI Administradora

Assuming the 90 days trading horizon Schwager is expected to generate 2.17 times less return on investment than MBI Administradora. But when comparing it to its historical volatility, Schwager is 1.14 times less risky than MBI Administradora. It trades about 0.05 of its potential returns per unit of risk. MBI Administradora General is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,514,301  in MBI Administradora General on October 9, 2024 and sell it today you would earn a total of  120,703  from holding MBI Administradora General or generate 4.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Schwager  vs.  MBI Administradora General

Schwager

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Schwager are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Schwager is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

MBI Administradora

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MBI Administradora General are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable basic indicators, MBI Administradora is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Schwager and MBI Administradora

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

The idea behind Schwager and MBI Administradora General 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.