Correlation Between Domo Fundo and Financeira Alfa

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

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

Diversification Opportunities for Domo Fundo and Financeira Alfa

-0.3

Correlation Coefficient

Domo Fundo  Financeira Alfa

Very good diversification

The 3 months correlation between Domo and Financeira is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Domo Fundo de and Financeira Alfa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financeira Alfa SA and Domo Fundo 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 Domo Fundo de are associated (or correlated) with Financeira Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financeira Alfa SA has no effect on the direction of Domo Fundo i.e., Domo Fundo and Financeira Alfa go up and down completely randomly.

Pair Corralation between Domo Fundo and Financeira Alfa

Assuming the 90 days trading horizon Domo Fundo de is expected to under-perform the Financeira Alfa. But the fund apears to be less risky and, when comparing its historical volatility, Domo Fundo de is 1.51 times less risky than Financeira Alfa. The fund trades about -0.04 of its potential returns per unit of risk. The Financeira Alfa SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  612.00  in Financeira Alfa SA on February 18, 2024 and sell it today you would earn a total of  86.00  from holding Financeira Alfa SA or generate 14.05% return on investment over 90 days.

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

Domo Fundo de  vs.  Financeira Alfa SA

Domo Fundo de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Domo Fundo de has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Domo Fundo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financeira Alfa SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Financeira Alfa SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Financeira Alfa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Domo Fundo and Financeira Alfa

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

The idea behind Domo Fundo de and Financeira Alfa 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.