Correlation Between S1YM34 and Loft II

Can any of the company-specific risk be diversified away by investing in both S1YM34 and Loft II 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 S1YM34 and Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between S1YM34 and Loft II Fundo, you can compare the effects of market volatilities on S1YM34 and Loft II 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 S1YM34 with a short position of Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of S1YM34 and Loft II.

Diversification Opportunities for S1YM34 and Loft II

-0.58

Correlation Coefficient

S1YM34  Loft II

Excellent diversification

The 3 months correlation between S1YM34 and Loft is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding S1YM34 and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo and S1YM34 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 S1YM34 are associated (or correlated) with Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of S1YM34 i.e., S1YM34 and Loft II go up and down completely randomly.

Pair Corralation between S1YM34 and Loft II

Assuming the 90 days trading horizon S1YM34 is expected to generate 0.46 times more return on investment than Loft II. However, S1YM34 is 2.17 times less risky than Loft II. It trades about 0.09 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.12 per unit of risk. If you would invest  13,739  in S1YM34 on September 27, 2024 and sell it today you would earn a total of  4,154  from holding S1YM34 or generate 30.24% return on investment over 90 days.

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

S1YM34  vs.  Loft II Fundo

S1YM34

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in S1YM34 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, S1YM34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loft II Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic 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.

Pair Trading with S1YM34 and Loft II

The main advantage of trading using opposite S1YM34 and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S1YM34 position performs unexpectedly, Loft II 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 Loft II will offset losses from the drop in Loft II's long position.

The idea behind S1YM34 and Loft II Fundo 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.