Correlation Between I3 Verticals and Dlocal

Can any of the company-specific risk be diversified away by investing in both I3 Verticals and Dlocal 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 I3 Verticals and Dlocal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between i3 Verticals and Dlocal, you can compare the effects of market volatilities on I3 Verticals and Dlocal 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 I3 Verticals with a short position of Dlocal. Check out your portfolio center. Please also check ongoing floating volatility patterns of I3 Verticals and Dlocal.

Diversification Opportunities for I3 Verticals and Dlocal

0.36

Correlation Coefficient

I3 Verticals  Dlocal

Weak diversification

The 3 months correlation between IIIV and Dlocal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding i3 Verticals and Dlocal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dlocal and I3 Verticals 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 i3 Verticals are associated (or correlated) with Dlocal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dlocal has no effect on the direction of I3 Verticals i.e., I3 Verticals and Dlocal go up and down completely randomly.

Pair Corralation between I3 Verticals and Dlocal

Given the investment horizon of 90 days I3 Verticals is expected to generate 3.93 times less return on investment than Dlocal. But when comparing it to its historical volatility, i3 Verticals is 1.4 times less risky than Dlocal. It trades about 0.07 of its potential returns per unit of risk. Dlocal is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  810.00  in Dlocal on September 21, 2024 and sell it today you would earn a total of  329.00  from holding Dlocal or generate 40.62% return on investment over 90 days.

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

i3 Verticals  vs.  Dlocal

i3 Verticals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in i3 Verticals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, I3 Verticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dlocal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dlocal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Dlocal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with I3 Verticals and Dlocal

The main advantage of trading using opposite I3 Verticals and Dlocal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I3 Verticals position performs unexpectedly, Dlocal 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 Dlocal will offset losses from the drop in Dlocal's long position.

The idea behind i3 Verticals and Dlocal 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.