Correlation Between Fras Le and Eucatex SA
Can any of the company-specific risk be diversified away by investing in both Fras Le and Eucatex SA 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 Fras Le and Eucatex SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Eucatex SA Indstria, you can compare the effects of market volatilities on Fras Le and Eucatex SA 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 Fras Le with a short position of Eucatex SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Eucatex SA.
Diversification Opportunities for Fras Le and Eucatex SA
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fras and Eucatex is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Eucatex SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eucatex SA Indstria and Fras Le 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 Fras le SA are associated (or correlated) with Eucatex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eucatex SA Indstria has no effect on the direction of Fras Le i.e., Fras Le and Eucatex SA go up and down completely randomly.
Pair Corralation between Fras Le and Eucatex SA
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Eucatex SA. In addition to that, Fras Le is 1.57 times more volatile than Eucatex SA Indstria. It trades about -0.25 of its total potential returns per unit of risk. Eucatex SA Indstria is currently generating about -0.22 per unit of volatility. If you would invest 1,436 in Eucatex SA Indstria on August 31, 2024 and sell it today you would lose (78.00) from holding Eucatex SA Indstria or give up 5.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fras le SA vs. Eucatex SA Indstria
Performance |
| Timeline |
| Fras le SA |
| Eucatex SA Indstria |
Fras Le and Eucatex SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Eucatex SA
The main advantage of trading using opposite Fras Le and Eucatex SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Eucatex SA 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 Eucatex SA will offset losses from the drop in Eucatex SA's long position.The idea behind Fras le SA and Eucatex SA Indstria 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.| Eucatex SA vs. Eternit SA | Eucatex SA vs. Cia de Ferro | Eucatex SA vs. Fras le SA | Eucatex SA vs. Iochpe Maxion SA |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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