Correlation Between Mapfre and All Iron
Can any of the company-specific risk be diversified away by investing in both Mapfre and All Iron 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 Mapfre and All Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mapfre and All Iron Re, you can compare the effects of market volatilities on Mapfre and All Iron 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 Mapfre with a short position of All Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mapfre and All Iron.
Diversification Opportunities for Mapfre and All Iron
Very poor diversification
The 3 months correlation between Mapfre and All is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mapfre and All Iron Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Iron Re and Mapfre 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 Mapfre are associated (or correlated) with All Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Iron Re has no effect on the direction of Mapfre i.e., Mapfre and All Iron go up and down completely randomly.
Pair Corralation between Mapfre and All Iron
Assuming the 90 days trading horizon Mapfre is expected to generate 0.55 times more return on investment than All Iron. However, Mapfre is 1.83 times less risky than All Iron. It trades about 0.09 of its potential returns per unit of risk. All Iron Re is currently generating about 0.0 per unit of risk. If you would invest 173.00 in Mapfre on September 1, 2024 and sell it today you would earn a total of 73.00 from holding Mapfre or generate 42.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Mapfre vs. All Iron Re
Performance |
| Timeline |
| Mapfre |
| All Iron Re |
Mapfre and All Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mapfre and All Iron
The main advantage of trading using opposite Mapfre and All Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mapfre position performs unexpectedly, All Iron 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 All Iron will offset losses from the drop in All Iron's long position.The idea behind Mapfre and All Iron Re 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.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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