Correlation Between Fras Le and Plano Plano

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

By analyzing existing cross correlation between Fras le SA and Plano Plano Desenvolvimento, you can compare the effects of market volatilities on Fras Le and Plano Plano 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 Fras Le with a short position of Plano Plano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Plano Plano.

Diversification Opportunities for Fras Le and Plano Plano

0.87

Correlation Coefficient

Fras Le  Plano Plano

Very poor diversification

The 3 months correlation between Fras and Plano is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Plano Plano Desenvolvimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plano Plano Desenvol and Fras Le 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 Fras le SA are associated (or correlated) with Plano Plano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plano Plano Desenvol has no effect on the direction of Fras Le i.e., Fras Le and Plano Plano go up and down completely randomly.

Pair Corralation between Fras Le and Plano Plano

Assuming the 90 days trading horizon Fras Le is expected to generate 1.06 times less return on investment than Plano Plano. But when comparing it to its historical volatility, Fras le SA is 1.65 times less risky than Plano Plano. It trades about 0.05 of its potential returns per unit of risk. Plano Plano Desenvolvimento is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Plano Plano Desenvolvimento on September 3, 2024 and sell it today you would earn a total of  33.00  from holding Plano Plano Desenvolvimento or generate 2.74% return on investment over 90 days.

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

Fras le SA  vs.  Plano Plano Desenvolvimento

Fras le SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Plano Plano Desenvol

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plano Plano Desenvolvimento are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plano Plano is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fras Le and Plano Plano

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

The idea behind Fras le SA and Plano Plano Desenvolvimento 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.