Correlation Between Xp and MRV Engenharia

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

By analyzing existing cross correlation between Xp Inc and MRV Engenharia e, you can compare the effects of market volatilities on Xp and MRV Engenharia 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 Xp with a short position of MRV Engenharia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xp and MRV Engenharia.

Diversification Opportunities for Xp and MRV Engenharia

-0.18

Correlation Coefficient

Xp  MRV Engenharia

Good diversification

The 3 months correlation between Xp and MRV is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and MRV Engenharia e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRV Engenharia e and Xp 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 Xp Inc are associated (or correlated) with MRV Engenharia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRV Engenharia e has no effect on the direction of Xp i.e., Xp and MRV Engenharia go up and down completely randomly.

Pair Corralation between Xp and MRV Engenharia

Assuming the 90 days trading horizon Xp Inc is expected to generate 0.71 times more return on investment than MRV Engenharia. However, Xp Inc is 1.4 times less risky than MRV Engenharia. It trades about 0.12 of its potential returns per unit of risk. MRV Engenharia e is currently generating about 0.01 per unit of risk. If you would invest  7,331  in Xp Inc on December 29, 2024 and sell it today you would earn a total of  1,211  from holding Xp Inc or generate 16.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Xp Inc  vs.  MRV Engenharia e

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Xp sustained solid returns over the last few months and may actually be approaching a breakup point.

MRV Engenharia e

Risk-Adjusted Performance

Very Weak

Over the last 90 days MRV Engenharia e has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MRV Engenharia 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 Xp and MRV Engenharia

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

The idea behind Xp Inc and MRV Engenharia e 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..