Correlation Between Fundo Investimento and HUSI11

Can any of the company-specific risk be diversified away by investing in both Fundo Investimento and HUSI11 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 Fundo Investimento and HUSI11 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundo Investimento Imobiliario and HUSI11, you can compare the effects of market volatilities on Fundo Investimento and HUSI11 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 Fundo Investimento with a short position of HUSI11. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo Investimento and HUSI11.

Diversification Opportunities for Fundo Investimento and HUSI11

-0.5

Correlation Coefficient

Fundo Investimento  HUSI11

Very good diversification

The 3 months correlation between Fundo and HUSI11 is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and HUSI11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUSI11 and Fundo Investimento 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 Fundo Investimento Imobiliario are associated (or correlated) with HUSI11. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUSI11 has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and HUSI11 go up and down completely randomly.

Pair Corralation between Fundo Investimento and HUSI11

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to under-perform the HUSI11. In addition to that, Fundo Investimento is 9.15 times more volatile than HUSI11. It trades about -0.17 of its total potential returns per unit of risk. HUSI11 is currently generating about 0.22 per unit of volatility. If you would invest  121,144  in HUSI11 on September 15, 2024 and sell it today you would earn a total of  1,356  from holding HUSI11 or generate 1.12% return on investment over 90 days.

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

Fundo Investimento Imobiliario  vs.  HUSI11

Fundo Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investimento Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

HUSI11

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HUSI11 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, HUSI11 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundo Investimento and HUSI11

The main advantage of trading using opposite Fundo Investimento and HUSI11 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundo Investimento position performs unexpectedly, HUSI11 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 HUSI11 will offset losses from the drop in HUSI11's long position.

The idea behind Fundo Investimento Imobiliario and HUSI11 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.