Correlation Between Basic Materials and Multiplan Empreendimentos

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

By analyzing existing cross correlation between Basic Materials and Multiplan Empreendimentos Imobilirios, you can compare the effects of market volatilities on Basic Materials and Multiplan Empreendimentos 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 Basic Materials with a short position of Multiplan Empreendimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Multiplan Empreendimentos.

Diversification Opportunities for Basic Materials and Multiplan Empreendimentos

-0.31

Correlation Coefficient

Basic Materials  Multiplan Empreendimentos

Very good diversification

The 3 months correlation between Basic and Multiplan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Multiplan Empreendimentos Imob in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiplan Empreendimentos and Basic Materials 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 Basic Materials are associated (or correlated) with Multiplan Empreendimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiplan Empreendimentos has no effect on the direction of Basic Materials i.e., Basic Materials and Multiplan Empreendimentos go up and down completely randomly.

Pair Corralation between Basic Materials and Multiplan Empreendimentos

Assuming the 90 days trading horizon Basic Materials is expected to generate 0.6 times more return on investment than Multiplan Empreendimentos. However, Basic Materials is 1.66 times less risky than Multiplan Empreendimentos. It trades about -0.09 of its potential returns per unit of risk. Multiplan Empreendimentos Imobilirios is currently generating about -0.15 per unit of risk. If you would invest  603,215  in Basic Materials on February 4, 2024 and sell it today you would lose (14,256) from holding Basic Materials or give up 2.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Basic Materials  vs.  Multiplan Empreendimentos Imob

Pair Trading with Basic Materials and Multiplan Empreendimentos

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

The idea behind Basic Materials and Multiplan Empreendimentos Imobilirios 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.