Correlation Between Lojas Quero and Natura Co

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

By analyzing existing cross correlation between Lojas Quero Quero SA and Natura Co Holding, you can compare the effects of market volatilities on Lojas Quero and Natura Co 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 Lojas Quero with a short position of Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lojas Quero and Natura Co.

Diversification Opportunities for Lojas Quero and Natura Co

0.18

Correlation Coefficient

Lojas Quero  Natura Co

Average diversification

The 3 months correlation between Lojas and Natura is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lojas Quero Quero SA and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding and Lojas Quero 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 Lojas Quero Quero SA are associated (or correlated) with Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Lojas Quero i.e., Lojas Quero and Natura Co go up and down completely randomly.

Pair Corralation between Lojas Quero and Natura Co

Assuming the 90 days trading horizon Lojas Quero Quero SA is expected to under-perform the Natura Co. In addition to that, Lojas Quero is 1.26 times more volatile than Natura Co Holding. It trades about -0.26 of its total potential returns per unit of risk. Natura Co Holding is currently generating about -0.08 per unit of volatility. If you would invest  1,445  in Natura Co Holding on September 24, 2024 and sell it today you would lose (91.00) from holding Natura Co Holding or give up 6.3% of portfolio value over 90 days.

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

Lojas Quero Quero SA  vs.  Natura Co Holding

Lojas Quero Quero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lojas Quero Quero SA 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 Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Natura Co Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natura Co Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Natura Co 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 Lojas Quero and Natura Co

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

The idea behind Lojas Quero Quero SA and Natura Co Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.