Correlation Between Knorr Bremse and Iochpe Maxion
Can any of the company-specific risk be diversified away by investing in both Knorr Bremse 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 Knorr Bremse and Iochpe Maxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knorr Bremse Aktiengesellschaft and Iochpe Maxion SA, you can compare the effects of market volatilities on Knorr Bremse 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 Knorr Bremse with a short position of Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knorr Bremse and Iochpe Maxion.
Diversification Opportunities for Knorr Bremse and Iochpe Maxion
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Knorr and Iochpe is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Knorr Bremse Aktiengesellschaf 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 Knorr Bremse 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 Knorr Bremse Aktiengesellschaft 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 Knorr Bremse i.e., Knorr Bremse and Iochpe Maxion go up and down completely randomly.
Pair Corralation between Knorr Bremse and Iochpe Maxion
Assuming the 90 days horizon Knorr Bremse is expected to generate 4.14 times less return on investment than Iochpe Maxion. But when comparing it to its historical volatility, Knorr Bremse Aktiengesellschaft is 3.34 times less risky than Iochpe Maxion. It trades about 0.03 of its potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Iochpe Maxion SA on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Iochpe Maxion SA or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 47.44% |
| Values | Daily Returns |
Knorr Bremse Aktiengesellschaf vs. Iochpe Maxion SA
Performance |
| Timeline |
| Knorr Bremse Aktieng |
| Iochpe Maxion SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Knorr Bremse and Iochpe Maxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knorr Bremse and Iochpe Maxion
The main advantage of trading using opposite Knorr Bremse and Iochpe Maxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knorr Bremse 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.| Knorr Bremse vs. 4 Less Group | Knorr Bremse vs. Foresight Autonomous Holdings | Knorr Bremse vs. Goodyear Tire Rubber | Knorr Bremse vs. Luminar Technologies |
| Iochpe Maxion vs. BJs Restaurants | Iochpe Maxion vs. JD Sports Fashion | Iochpe Maxion vs. Sweetgreen | Iochpe Maxion vs. Cracker Barrel Old |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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