Correlation Between Biomm SA and M Dias
Can any of the company-specific risk be diversified away by investing in both Biomm SA and M Dias 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 Biomm SA and M Dias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biomm SA and M Dias Branco, you can compare the effects of market volatilities on Biomm SA and M Dias 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 Biomm SA with a short position of M Dias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biomm SA and M Dias.
Diversification Opportunities for Biomm SA and M Dias
Weak diversification
The 3 months correlation between Biomm and MDIA3 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Biomm SA and M Dias Branco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Dias Branco and Biomm SA 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 Biomm SA are associated (or correlated) with M Dias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Dias Branco has no effect on the direction of Biomm SA i.e., Biomm SA and M Dias go up and down completely randomly.
Pair Corralation between Biomm SA and M Dias
Assuming the 90 days trading horizon Biomm SA is expected to generate 1.01 times more return on investment than M Dias. However, Biomm SA is 1.01 times more volatile than M Dias Branco. It trades about -0.1 of its potential returns per unit of risk. M Dias Branco is currently generating about -0.16 per unit of risk. If you would invest 877.00 in Biomm SA on September 1, 2024 and sell it today you would lose (66.00) from holding Biomm SA or give up 7.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Biomm SA vs. M Dias Branco
Performance |
| Timeline |
| Biomm SA |
| M Dias Branco |
Biomm SA and M Dias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biomm SA and M Dias
The main advantage of trading using opposite Biomm SA and M Dias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomm SA position performs unexpectedly, M Dias 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 M Dias will offset losses from the drop in M Dias' long position.The idea behind Biomm SA and M Dias Branco 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.Check out your portfolio center.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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