Correlation Between Basic Materials and Kinea II
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Kinea II 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 Kinea II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Kinea II Real, you can compare the effects of market volatilities on Basic Materials and Kinea II 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 Kinea II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Kinea II.
Diversification Opportunities for Basic Materials and Kinea II
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Kinea is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Kinea II Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinea II Real 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 Kinea II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinea II Real has no effect on the direction of Basic Materials i.e., Basic Materials and Kinea II go up and down completely randomly.
Pair Corralation between Basic Materials and Kinea II
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.23 times more return on investment than Kinea II. However, Basic Materials is 4.27 times less risky than Kinea II. It trades about 0.01 of its potential returns per unit of risk. Kinea II Real is currently generating about -0.08 per unit of risk. If you would invest 575,417 in Basic Materials on August 30, 2024 and sell it today you would earn a total of 750.00 from holding Basic Materials or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Basic Materials vs. Kinea II Real
Performance |
| Timeline |
Basic Materials and Kinea II Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Kinea II Real
Pair trading matchups for Kinea II
Pair Trading with Basic Materials and Kinea II
The main advantage of trading using opposite Basic Materials and Kinea II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Kinea II 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 Kinea II will offset losses from the drop in Kinea II's long position.| Basic Materials vs. United Rentals | Basic Materials vs. Livetech da Bahia | Basic Materials vs. Telecomunicaes Brasileiras SA | Basic Materials vs. Charter Communications |
| Kinea II vs. Kinea Oportunidades Real | Kinea II vs. Kinea Indices Precos | Kinea II vs. Kinea Creditas Fundo | Kinea II vs. Kinea Securities Fundo |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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