Correlation Between Lupatech and LESTE FDO

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

By analyzing existing cross correlation between Lupatech SA and LESTE FDO INV, you can compare the effects of market volatilities on Lupatech and LESTE FDO 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 Lupatech with a short position of LESTE FDO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lupatech and LESTE FDO.

Diversification Opportunities for Lupatech and LESTE FDO

0.39

Correlation Coefficient

Lupatech  LESTE FDO

Weak diversification

The 3 months correlation between Lupatech and LESTE is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and LESTE FDO INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LESTE FDO INV and Lupatech 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 Lupatech SA are associated (or correlated) with LESTE FDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LESTE FDO INV has no effect on the direction of Lupatech i.e., Lupatech and LESTE FDO go up and down completely randomly.

Pair Corralation between Lupatech and LESTE FDO

Assuming the 90 days trading horizon Lupatech SA is expected to generate 1.88 times more return on investment than LESTE FDO. However, Lupatech is 1.88 times more volatile than LESTE FDO INV. It trades about -0.04 of its potential returns per unit of risk. LESTE FDO INV is currently generating about -0.1 per unit of risk. If you would invest  144.00  in Lupatech SA on September 12, 2024 and sell it today you would lose (12.00) from holding Lupatech SA or give up 8.33% of portfolio value over 90 days.

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

Lupatech SA  vs.  LESTE FDO INV

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Lupatech and LESTE FDO

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

The idea behind Lupatech SA and LESTE FDO INV 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.