Correlation Between Fundo Investimento and Rumo SA

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

Diversification Opportunities for Fundo Investimento and Rumo SA

-0.51

Correlation Coefficient

Fundo Investimento  Rumo SA

Excellent diversification

The 3 months correlation between Fundo and Rumo is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and Rumo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumo SA 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 Rumo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumo SA has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and Rumo SA go up and down completely randomly.

Pair Corralation between Fundo Investimento and Rumo SA

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to generate 0.44 times more return on investment than Rumo SA. However, Fundo Investimento Imobiliario is 2.25 times less risky than Rumo SA. It trades about 0.04 of its potential returns per unit of risk. Rumo SA is currently generating about -0.03 per unit of risk. If you would invest  8,497  in Fundo Investimento Imobiliario on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Fundo Investimento Imobiliario or generate 1.68% 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.  Rumo SA

Fundo Investimento

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fundo Investimento Imobiliario are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong essential indicators, Fundo Investimento is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rumo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rumo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rumo SA 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 Fundo Investimento and Rumo SA

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

The idea behind Fundo Investimento Imobiliario and Rumo 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.