Correlation Between Smartfit Escola and Multilaser Industrial

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

By analyzing existing cross correlation between Smartfit Escola de and Multilaser Industrial SA, you can compare the effects of market volatilities on Smartfit Escola and Multilaser Industrial 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 Smartfit Escola with a short position of Multilaser Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smartfit Escola and Multilaser Industrial.

Diversification Opportunities for Smartfit Escola and Multilaser Industrial

0.92

Correlation Coefficient

Smartfit Escola  Multilaser Industrial

Almost no diversification

The 3 months correlation between Smartfit and Multilaser is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Smartfit Escola de and Multilaser Industrial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multilaser Industrial and Smartfit Escola 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 Smartfit Escola de are associated (or correlated) with Multilaser Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multilaser Industrial has no effect on the direction of Smartfit Escola i.e., Smartfit Escola and Multilaser Industrial go up and down completely randomly.

Pair Corralation between Smartfit Escola and Multilaser Industrial

Assuming the 90 days trading horizon Smartfit Escola de is expected to generate 0.61 times more return on investment than Multilaser Industrial. However, Smartfit Escola de is 1.65 times less risky than Multilaser Industrial. It trades about -0.05 of its potential returns per unit of risk. Multilaser Industrial SA is currently generating about -0.23 per unit of risk. If you would invest  1,914  in Smartfit Escola de on September 17, 2024 and sell it today you would lose (59.00) from holding Smartfit Escola de or give up 3.08% of portfolio value over 90 days.

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

Smartfit Escola de  vs.  Multilaser Industrial SA

Smartfit Escola de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smartfit Escola de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Multilaser Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multilaser Industrial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Smartfit Escola and Multilaser Industrial

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

The idea behind Smartfit Escola de and Multilaser Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.