Correlation Between Fator IFIX and Companhia

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

By analyzing existing cross correlation between Fator IFIX Fundo and Companhia de Tecidos, you can compare the effects of market volatilities on Fator IFIX and Companhia 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 Fator IFIX with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fator IFIX and Companhia.

Diversification Opportunities for Fator IFIX and Companhia

-0.64

Correlation Coefficient

Fator IFIX  Companhia

Excellent diversification

The 3 months correlation between Fator and Companhia is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fator IFIX Fundo and Companhia de Tecidos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Tecidos and Fator IFIX 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 Fator IFIX Fundo are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Tecidos has no effect on the direction of Fator IFIX i.e., Fator IFIX and Companhia go up and down completely randomly.

Pair Corralation between Fator IFIX and Companhia

Assuming the 90 days trading horizon Fator IFIX Fundo is expected to generate 0.35 times more return on investment than Companhia. However, Fator IFIX Fundo is 2.87 times less risky than Companhia. It trades about -0.06 of its potential returns per unit of risk. Companhia de Tecidos is currently generating about -0.42 per unit of risk. If you would invest  6,212  in Fator IFIX Fundo on February 2, 2024 and sell it today you would lose (47.00) from holding Fator IFIX Fundo or give up 0.76% of portfolio value over 90 days.

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

Fator IFIX Fundo  vs.  Companhia de Tecidos

Fator IFIX Fundo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fator IFIX Fundo are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Fator IFIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Companhia de Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Tecidos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fator IFIX and Companhia

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

The idea behind Fator IFIX Fundo and Companhia de Tecidos 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.