Correlation Between Parque Dom and Iochpe Maxion

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

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

Diversification Opportunities for Parque Dom and Iochpe Maxion

0.85

Correlation Coefficient

Parque Dom  Iochpe Maxion

Very poor diversification

The 3 months correlation between Parque and Iochpe is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Parque Dom Pedro 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 Parque Dom 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 Parque Dom Pedro 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 Parque Dom i.e., Parque Dom and Iochpe Maxion go up and down completely randomly.

Pair Corralation between Parque Dom and Iochpe Maxion

Assuming the 90 days trading horizon Parque Dom is expected to generate 1.49 times less return on investment than Iochpe Maxion. But when comparing it to its historical volatility, Parque Dom Pedro is 1.54 times less risky than Iochpe Maxion. It trades about 0.16 of its potential returns per unit of risk. Iochpe Maxion SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,169  in Iochpe Maxion SA on April 20, 2025 and sell it today you would earn a total of  206.00  from holding Iochpe Maxion SA or generate 17.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Parque Dom Pedro  vs.  Iochpe Maxion SA

Parque Dom Pedro

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parque Dom Pedro are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental indicators, Parque Dom may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Iochpe Maxion SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 12 (%) 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 Parque Dom and Iochpe Maxion

The main advantage of trading using opposite Parque Dom and Iochpe Maxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parque Dom 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 Parque Dom Pedro 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.