Correlation Between Localiza Rent and JBS SA

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

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

Diversification Opportunities for Localiza Rent and JBS SA

-0.74

Correlation Coefficient

Localiza Rent  JBS SA

Pay attention - limited upside

The 3 months correlation between Localiza and JBS is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Localiza Rent a and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and Localiza Rent 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 Localiza Rent a are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Localiza Rent i.e., Localiza Rent and JBS SA go up and down completely randomly.

Pair Corralation between Localiza Rent and JBS SA

Assuming the 90 days trading horizon Localiza Rent a is expected to under-perform the JBS SA. In addition to that, Localiza Rent is 1.89 times more volatile than JBS SA. It trades about -0.28 of its total potential returns per unit of risk. JBS SA is currently generating about 0.12 per unit of volatility. If you would invest  3,565  in JBS SA on September 23, 2024 and sell it today you would earn a total of  186.00  from holding JBS SA or generate 5.22% return on investment over 90 days.

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

Localiza Rent a  vs.  JBS SA

Localiza Rent a

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Localiza Rent a has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

JBS SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Localiza Rent and JBS SA

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

The idea behind Localiza Rent a and JBS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.