Correlation Between Fundo Investimento and Vulcan Materials

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

Diversification Opportunities for Fundo Investimento and Vulcan Materials

-0.6

Correlation Coefficient

Fundo Investimento  Vulcan Materials

Excellent diversification

The 3 months correlation between Fundo and Vulcan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and Vulcan Materials go up and down completely randomly.

Pair Corralation between Fundo Investimento and Vulcan Materials

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to generate 0.97 times more return on investment than Vulcan Materials. However, Fundo Investimento Imobiliario is 1.03 times less risky than Vulcan Materials. It trades about 0.38 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.28 per unit of risk. If you would invest  7,862  in Fundo Investimento Imobiliario on October 6, 2024 and sell it today you would earn a total of  669.00  from holding Fundo Investimento Imobiliario or generate 8.51% return on investment over 90 days.

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

Fundo Investimento Imobiliario  vs.  Vulcan Materials

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 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.

Vulcan Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Vulcan Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundo Investimento and Vulcan Materials

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

The idea behind Fundo Investimento Imobiliario and Vulcan Materials 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.