Correlation Between Basic Materials and IShares Ibovespa
Can any of the company-specific risk be diversified away by investing in both Basic Materials and IShares Ibovespa 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 Basic Materials and IShares Ibovespa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and iShares Ibovespa Index, you can compare the effects of market volatilities on Basic Materials and IShares Ibovespa 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 Basic Materials with a short position of IShares Ibovespa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and IShares Ibovespa.
Diversification Opportunities for Basic Materials and IShares Ibovespa
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and IShares is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and iShares Ibovespa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ibovespa Index and Basic Materials 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 Basic Materials are associated (or correlated) with IShares Ibovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ibovespa Index has no effect on the direction of Basic Materials i.e., Basic Materials and IShares Ibovespa go up and down completely randomly.
Pair Corralation between Basic Materials and IShares Ibovespa
Assuming the 90 days trading horizon Basic Materials is expected to generate 1.39 times more return on investment than IShares Ibovespa. However, Basic Materials is 1.39 times more volatile than iShares Ibovespa Index. It trades about 0.08 of its potential returns per unit of risk. iShares Ibovespa Index is currently generating about 0.04 per unit of risk. If you would invest 531,423 in Basic Materials on September 2, 2024 and sell it today you would earn a total of 55,987 from holding Basic Materials or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Basic Materials vs. iShares Ibovespa Index
Performance |
| Timeline |
Basic Materials and IShares Ibovespa Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
iShares Ibovespa Index
Pair trading matchups for IShares Ibovespa
Pair Trading with Basic Materials and IShares Ibovespa
The main advantage of trading using opposite Basic Materials and IShares Ibovespa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, IShares Ibovespa 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 IShares Ibovespa will offset losses from the drop in IShares Ibovespa's long position.| Basic Materials vs. Uber Technologies | Basic Materials vs. Palantir Technologies | Basic Materials vs. Marvell Technology | Basic Materials vs. Align Technology |
| IShares Ibovespa vs. iShares BMFBovespa Small | IShares Ibovespa vs. iShares Trust | IShares Ibovespa vs. iShares Trust | IShares Ibovespa vs. iShares Trust |
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 Stocks Directory module to find actively traded stocks across global markets.
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