Correlation Between IRB Brasil and Dow Jones
Can any of the company-specific risk be diversified away by investing in both IRB Brasil and Dow Jones 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 IRB Brasil and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IRB Brasil Resseguros SA and Dow Jones Industrial, you can compare the effects of market volatilities on IRB Brasil and Dow Jones 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 IRB Brasil with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRB Brasil and Dow Jones.
Diversification Opportunities for IRB Brasil and Dow Jones
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IRB and Dow is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding IRB Brasil Resseguros SA and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and IRB Brasil 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 IRB Brasil Resseguros SA are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of IRB Brasil i.e., IRB Brasil and Dow Jones go up and down completely randomly.
Pair Corralation between IRB Brasil and Dow Jones
Assuming the 90 days trading horizon IRB Brasil Resseguros SA is expected to generate 5.47 times more return on investment than Dow Jones. However, IRB Brasil is 5.47 times more volatile than Dow Jones Industrial. It trades about 0.05 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 2,040 in IRB Brasil Resseguros SA on August 28, 2024 and sell it today you would earn a total of 1,935 from holding IRB Brasil Resseguros SA or generate 94.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
IRB Brasil Resseguros SA vs. Dow Jones Industrial
Performance |
| Timeline |
IRB Brasil and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
IRB Brasil Resseguros SA
Pair trading matchups for IRB Brasil
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with IRB Brasil and Dow Jones
The main advantage of trading using opposite IRB Brasil and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRB Brasil position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| IRB Brasil vs. Banco Alfa de | IRB Brasil vs. Financeira Alfa SA | IRB Brasil vs. Banco Alfa de | IRB Brasil vs. Financeira Alfa SA |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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