Correlation Between Rec Fundo and Fras Le

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

By analyzing existing cross correlation between Rec Fundo De and Fras le SA, you can compare the effects of market volatilities on Rec Fundo and Fras Le 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 Rec Fundo with a short position of Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rec Fundo and Fras Le.

Diversification Opportunities for Rec Fundo and Fras Le

-0.6

Correlation Coefficient

Rec Fundo  Fras Le

Excellent diversification

The 3 months correlation between Rec and Fras is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rec Fundo De and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA and Rec Fundo 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 Rec Fundo De are associated (or correlated) with Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Rec Fundo i.e., Rec Fundo and Fras Le go up and down completely randomly.

Pair Corralation between Rec Fundo and Fras Le

Assuming the 90 days trading horizon Rec Fundo De is expected to generate 2.7 times more return on investment than Fras Le. However, Rec Fundo is 2.7 times more volatile than Fras le SA. It trades about 0.04 of its potential returns per unit of risk. Fras le SA is currently generating about 0.01 per unit of risk. If you would invest  6,469  in Rec Fundo De on September 5, 2024 and sell it today you would earn a total of  330.00  from holding Rec Fundo De or generate 5.1% return on investment over 90 days.

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

Rec Fundo De  vs.  Fras le SA

Rec Fundo De

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rec Fundo De are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat uncertain fundamental indicators, Rec Fundo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fras le SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fras le SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rec Fundo and Fras Le

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

The idea behind Rec Fundo De and Fras le SA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.