Correlation Between FDO INV and Iochpe Maxion

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

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

Diversification Opportunities for FDO INV and Iochpe Maxion

0.83

Correlation Coefficient

FDO INV  Iochpe Maxion

Very poor diversification

The 3 months correlation between FDO and Iochpe is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV Imob 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 FDO INV 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 FDO INV Imob 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 FDO INV i.e., FDO INV and Iochpe Maxion go up and down completely randomly.

Pair Corralation between FDO INV and Iochpe Maxion

Assuming the 90 days trading horizon FDO INV is expected to generate 1.23 times less return on investment than Iochpe Maxion. But when comparing it to its historical volatility, FDO INV Imob is 1.04 times less risky than Iochpe Maxion. It trades about 0.13 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	100.0%
Values	Daily Returns

FDO INV Imob  vs.  Iochpe Maxion SA

FDO INV Imob

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV Imob are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, FDO INV sustained solid returns over the last few months and may actually be approaching a breakup point.

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 FDO INV and Iochpe Maxion

The main advantage of trading using opposite FDO INV and Iochpe Maxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FDO INV 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 FDO INV Imob 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.