Correlation Between All Iron and Mapfre

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

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

Diversification Opportunities for All Iron and Mapfre

0.43

Correlation Coefficient

All Iron  Mapfre

Very weak diversification

The 3 months correlation between All and Mapfre is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding All Iron Re and Mapfre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre and All Iron 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 All Iron Re are associated (or correlated) with Mapfre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre has no effect on the direction of All Iron i.e., All Iron and Mapfre go up and down completely randomly.

Pair Corralation between All Iron and Mapfre

Assuming the 90 days trading horizon All Iron Re is expected to under-perform the Mapfre. But the stock apears to be less risky and, when comparing its historical volatility, All Iron Re is 2.09 times less risky than Mapfre. The stock trades about -0.02 of its potential returns per unit of risk. The Mapfre is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Mapfre on December 28, 2024 and sell it today you would earn a total of  42.00  from holding Mapfre or generate 17.21% return on investment over 90 days.

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

All Iron Re  vs.  Mapfre

All Iron Re

Risk-Adjusted Performance

Very Weak

Over the last 90 days All Iron Re has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, All Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Mapfre

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with All Iron and Mapfre

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

The idea behind All Iron Re and Mapfre 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.