Correlation Between Mundial SA and WEG SA

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Can any of the company-specific risk be diversified away by investing in both Mundial SA and WEG 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 Mundial SA and WEG SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mundial SA and WEG SA, you can compare the effects of market volatilities on Mundial SA and WEG 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 Mundial SA with a short position of WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mundial SA and WEG SA.

Diversification Opportunities for Mundial SA and WEG SA

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Mundial and WEG is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mundial SA and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA and Mundial SA 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 Mundial SA are associated (or correlated) with WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Mundial SA i.e., Mundial SA and WEG SA go up and down completely randomly.

Pair Corralation between Mundial SA and WEG SA

Assuming the 90 days trading horizon Mundial SA is expected to under-perform the WEG SA. In addition to that, Mundial SA is 2.89 times more volatile than WEG SA. It trades about -0.11 of its total potential returns per unit of risk. WEG SA is currently generating about 0.07 per unit of volatility. If you would invest  3,820  in WEG SA on February 6, 2024 and sell it today you would earn a total of  57.00  from holding WEG SA or generate 1.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Mundial SA   vs.  WEG SA

 Performance 
       Timeline  
Mundial SA 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Mundial SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mundial SA may actually be approaching a critical reversion point that can send shares even higher in June 2024.
WEG SA 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WEG SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mundial SA and WEG SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mundial SA and WEG SA

The main advantage of trading using opposite Mundial SA and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mundial SA position performs unexpectedly, WEG 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 WEG SA will offset losses from the drop in WEG SA's long position.
The idea behind Mundial SA and WEG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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