Correlation Between Patria Latin and LF Capital

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

By analyzing existing cross correlation between Patria Latin American and LF Capital Acquisition, you can compare the effects of market volatilities on Patria Latin and LF Capital 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 Patria Latin with a short position of LF Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patria Latin and LF Capital.

Diversification Opportunities for Patria Latin and LF Capital

0.83

Correlation Coefficient

Patria Latin  LF Capital

Very poor diversification

The 3 months correlation between Patria and LFAC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Patria Latin American and LF Capital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF Capital Acquisition and Patria Latin 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 Patria Latin American are associated (or correlated) with LF Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LF Capital Acquisition has no effect on the direction of Patria Latin i.e., Patria Latin and LF Capital go up and down completely randomly.

Pair Corralation between Patria Latin and LF Capital

If you would invest  1,158  in Patria Latin American on September 16, 2024 and sell it today you would earn a total of  5.00  from holding Patria Latin American or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.54%
Values	Daily Returns

Patria Latin American  vs.  LF Capital Acquisition

Patria Latin American

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Latin American are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Patria Latin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

LF Capital Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LF Capital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LF Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Patria Latin and LF Capital

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

The idea behind Patria Latin American and LF Capital Acquisition 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 Global Correlations module to find global opportunities by holding instruments from different markets.