Correlation Between Cia De and Iochpe Maxion

Can any of the company-specific risk be diversified away by investing in both Cia De 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 Cia De and Iochpe Maxion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cia de Ferro and Iochpe Maxion SA, you can compare the effects of market volatilities on Cia De 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 Cia De with a short position of Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cia De and Iochpe Maxion.

Diversification Opportunities for Cia De and Iochpe Maxion

-0.58

Correlation Coefficient

Cia De  Iochpe Maxion

Excellent diversification

The 3 months correlation between Cia and Iochpe is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Ferro 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 Cia De 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 Cia de Ferro 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 Cia De i.e., Cia De and Iochpe Maxion go up and down completely randomly.

Pair Corralation between Cia De and Iochpe Maxion

Assuming the 90 days trading horizon Cia de Ferro is expected to under-perform the Iochpe Maxion. But the preferred stock apears to be less risky and, when comparing its historical volatility, Cia de Ferro is 1.07 times less risky than Iochpe Maxion. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Iochpe Maxion SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,192  in Iochpe Maxion SA on April 23, 2025 and sell it today you would earn a total of  179.00  from holding Iochpe Maxion SA or generate 15.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Cia de Ferro  vs.  Iochpe Maxion SA

Cia de Ferro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cia de Ferro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cia De is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Iochpe Maxion SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Iochpe Maxion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cia De and Iochpe Maxion

The main advantage of trading using opposite Cia De and Iochpe Maxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cia De 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.

The idea behind Cia de Ferro and Iochpe Maxion 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.