Correlation Between BTG Pactual and Loft II

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

By analyzing existing cross correlation between BTG Pactual Logstica and Loft II Fundo, you can compare the effects of market volatilities on BTG Pactual and Loft II 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 BTG Pactual with a short position of Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Pactual and Loft II.

Diversification Opportunities for BTG Pactual and Loft II

0.62

Correlation Coefficient

BTG Pactual  Loft II

Poor diversification

The 3 months correlation between BTG and Loft is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Logstica and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo and BTG Pactual 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 BTG Pactual Logstica are associated (or correlated) with Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of BTG Pactual i.e., BTG Pactual and Loft II go up and down completely randomly.

Pair Corralation between BTG Pactual and Loft II

Assuming the 90 days trading horizon BTG Pactual Logstica is expected to generate 0.3 times more return on investment than Loft II. However, BTG Pactual Logstica is 3.39 times less risky than Loft II. It trades about -0.05 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.1 per unit of risk. If you would invest  9,915  in BTG Pactual Logstica on September 27, 2024 and sell it today you would lose (515.00) from holding BTG Pactual Logstica or give up 5.19% of portfolio value over 90 days.

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

BTG Pactual Logstica  vs.  Loft II Fundo

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

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

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loft II Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with BTG Pactual and Loft II

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

The idea behind BTG Pactual Logstica and Loft II Fundo 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.