Correlation Between Real Estate and LESTE FDO

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

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

Diversification Opportunities for Real Estate and LESTE FDO

0.88

Correlation Coefficient

Real Estate  LESTE FDO

Very poor diversification

The 3 months correlation between Real and LESTE is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Investment 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 Real Estate 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 Real Estate Investment 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 Real Estate i.e., Real Estate and LESTE FDO go up and down completely randomly.

Pair Corralation between Real Estate and LESTE FDO

Assuming the 90 days trading horizon Real Estate Investment is expected to under-perform the LESTE FDO. But the fund apears to be less risky and, when comparing its historical volatility, Real Estate Investment is 1.23 times less risky than LESTE FDO. The fund trades about -0.43 of its potential returns per unit of risk. The LESTE FDO INV is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  7,355  in LESTE FDO INV on September 12, 2024 and sell it today you would lose (394.00) from holding LESTE FDO INV or give up 5.36% of portfolio value over 90 days.

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

Real Estate Investment  vs.  LESTE FDO INV

Real Estate Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Investment has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's technical indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 Real Estate and LESTE FDO

The main advantage of trading using opposite Real Estate and LESTE FDO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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 Real Estate Investment 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.