Correlation Between Lavoro Limited and KS AG

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

By analyzing existing cross correlation between Lavoro Limited Class and KS AG DRC, you can compare the effects of market volatilities on Lavoro Limited and KS AG 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 Lavoro Limited with a short position of KS AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lavoro Limited and KS AG.

Diversification Opportunities for Lavoro Limited and KS AG

-0.43

Correlation Coefficient

Lavoro Limited  KS AG

Very good diversification

The 3 months correlation between Lavoro and KPLUY is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Class and KS AG DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KS AG DRC and Lavoro Limited 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 Lavoro Limited Class are associated (or correlated) with KS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KS AG DRC has no effect on the direction of Lavoro Limited i.e., Lavoro Limited and KS AG go up and down completely randomly.

Pair Corralation between Lavoro Limited and KS AG

Given the investment horizon of 90 days Lavoro Limited Class is expected to generate 1.95 times more return on investment than KS AG. However, Lavoro Limited is 1.95 times more volatile than KS AG DRC. It trades about 0.04 of its potential returns per unit of risk. KS AG DRC is currently generating about 0.01 per unit of risk. If you would invest  463.00  in Lavoro Limited Class on September 16, 2024 and sell it today you would earn a total of  20.00  from holding Lavoro Limited Class or generate 4.32% return on investment over 90 days.

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

Lavoro Limited Class  vs.  KS AG DRC

Lavoro Limited Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Lavoro Limited may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KS AG DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KS AG DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KS AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lavoro Limited and KS AG

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

The idea behind Lavoro Limited Class and KS AG DRC 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.