Correlation Between HEDGE Brasil and HEDGE OFFICE

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

By analyzing existing cross correlation between HEDGE Brasil Shopping and HEDGE OFFICE INCOME, you can compare the effects of market volatilities on HEDGE Brasil and HEDGE OFFICE 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 HEDGE Brasil with a short position of HEDGE OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HEDGE Brasil and HEDGE OFFICE.

Diversification Opportunities for HEDGE Brasil and HEDGE OFFICE

-0.58

Correlation Coefficient

HEDGE Brasil  HEDGE OFFICE

Excellent diversification

The 3 months correlation between HEDGE and HEDGE is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and HEDGE OFFICE INCOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDGE OFFICE INCOME and HEDGE 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 HEDGE Brasil Shopping are associated (or correlated) with HEDGE OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDGE OFFICE INCOME has no effect on the direction of HEDGE Brasil i.e., HEDGE Brasil and HEDGE OFFICE go up and down completely randomly.

Pair Corralation between HEDGE Brasil and HEDGE OFFICE

Assuming the 90 days trading horizon HEDGE Brasil Shopping is expected to under-perform the HEDGE OFFICE. But the fund apears to be less risky and, when comparing its historical volatility, HEDGE Brasil Shopping is 6.13 times less risky than HEDGE OFFICE. The fund trades about -0.29 of its potential returns per unit of risk. The HEDGE OFFICE INCOME is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,878  in HEDGE OFFICE INCOME on January 31, 2024 and sell it today you would earn a total of  187.00  from holding HEDGE OFFICE INCOME or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

HEDGE Brasil Shopping  vs.  HEDGE OFFICE INCOME

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, HEDGE Brasil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HEDGE OFFICE INCOME

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HEDGE OFFICE INCOME are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, HEDGE OFFICE sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEDGE Brasil and HEDGE OFFICE

The main advantage of trading using opposite HEDGE Brasil and HEDGE OFFICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEDGE Brasil position performs unexpectedly, HEDGE OFFICE 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 HEDGE OFFICE will offset losses from the drop in HEDGE OFFICE's long position.

The idea behind HEDGE Brasil Shopping and HEDGE OFFICE INCOME 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.