Correlation Between Fundo Investimento and Metalrgica Riosulense

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

Diversification Opportunities for Fundo Investimento and Metalrgica Riosulense

-0.1

Correlation Coefficient

Fundo Investimento  Metalrgica Riosulense

Good diversification

The 3 months correlation between Fundo and Metalrgica is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and Metalrgica Riosulense SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalrgica Riosulense 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 Metalrgica Riosulense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalrgica Riosulense has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and Metalrgica Riosulense go up and down completely randomly.

Pair Corralation between Fundo Investimento and Metalrgica Riosulense

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to under-perform the Metalrgica Riosulense. But the fund apears to be less risky and, when comparing its historical volatility, Fundo Investimento Imobiliario is 1.4 times less risky than Metalrgica Riosulense. The fund trades about -0.08 of its potential returns per unit of risk. The Metalrgica Riosulense SA is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  5,500  in Metalrgica Riosulense SA on December 2, 2024 and sell it today you would earn a total of  1,300  from holding Metalrgica Riosulense SA or generate 23.64% return on investment over 90 days.

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

Fundo Investimento Imobiliario  vs.  Metalrgica Riosulense SA

Fundo Investimento

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundo Investimento Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. 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.

Metalrgica Riosulense

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metalrgica Riosulense SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metalrgica Riosulense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundo Investimento and Metalrgica Riosulense

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

The idea behind Fundo Investimento Imobiliario and Metalrgica Riosulense 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.