Correlation Between Fras Le and Iochpe Maxion
Can any of the company-specific risk be diversified away by investing in both Fras Le and Iochpe Maxion 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 Iochpe Maxion 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 Iochpe Maxion SA, you can compare the effects of market volatilities on Fras Le and Iochpe Maxion 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 Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Iochpe Maxion.
Diversification Opportunities for Fras Le and Iochpe Maxion
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fras and Iochpe is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Iochpe Maxion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iochpe Maxion SA 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 Iochpe Maxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iochpe Maxion SA has no effect on the direction of Fras Le i.e., Fras Le and Iochpe Maxion go up and down completely randomly.
Pair Corralation between Fras Le and Iochpe Maxion
Assuming the 90 days trading horizon Fras le SA is expected to generate 0.64 times more return on investment than Iochpe Maxion. However, Fras le SA is 1.57 times less risky than Iochpe Maxion. It trades about 0.11 of its potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.02 per unit of risk. If you would invest 1,258 in Fras le SA on August 28, 2024 and sell it today you would earn a total of 850.00 from holding Fras le SA or generate 67.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fras le SA vs. Iochpe Maxion SA
Performance |
| Timeline |
| Fras le SA |
| Iochpe Maxion SA |
Fras Le and Iochpe Maxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Iochpe Maxion
The main advantage of trading using opposite Fras Le and Iochpe Maxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Iochpe Maxion 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 Iochpe Maxion will offset losses from the drop in Iochpe Maxion's long position.The idea behind Fras le SA and Iochpe Maxion SA 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.| Iochpe Maxion vs. Tupy SA | Iochpe Maxion vs. MAHLE Metal Leve | Iochpe Maxion vs. Randon SA Implementos | Iochpe Maxion vs. Marcopolo 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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