Correlation Between M Dias and JBS SA
Can any of the company-specific risk be diversified away by investing in both M Dias and JBS SA 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 M Dias and JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Dias Branco and JBS SA, you can compare the effects of market volatilities on M Dias and JBS SA 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 M Dias with a short position of JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Dias and JBS SA.
Diversification Opportunities for M Dias and JBS SA
Good diversification
The 3 months correlation between MDIA3 and JBS is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding M Dias Branco and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and M Dias 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 M Dias Branco are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of M Dias i.e., M Dias and JBS SA go up and down completely randomly.
Pair Corralation between M Dias and JBS SA
Assuming the 90 days trading horizon M Dias Branco is expected to under-perform the JBS SA. In addition to that, M Dias is 1.5 times more volatile than JBS SA. It trades about -0.17 of its total potential returns per unit of risk. JBS SA is currently generating about -0.01 per unit of volatility. If you would invest 3,535 in JBS SA on August 30, 2024 and sell it today you would lose (29.00) from holding JBS SA or give up 0.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Dias Branco vs. JBS SA
Performance |
| Timeline |
| M Dias Branco |
| JBS SA |
M Dias and JBS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Dias and JBS SA
The main advantage of trading using opposite M Dias and JBS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Dias position performs unexpectedly, JBS SA 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 JBS SA will offset losses from the drop in JBS SA's long position.The idea behind M Dias Branco and JBS SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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