Correlation Between VHAI and Dlocal

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

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

Diversification Opportunities for VHAI and Dlocal

-0.34

Correlation Coefficient

VHAI  Dlocal

Very good diversification

The 3 months correlation between VHAI and Dlocal is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Dlocal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dlocal and VHAI 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 VHAI are associated (or correlated) with Dlocal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dlocal has no effect on the direction of VHAI i.e., VHAI and Dlocal go up and down completely randomly.

Pair Corralation between VHAI and Dlocal

Given the investment horizon of 90 days VHAI is expected to under-perform the Dlocal. In addition to that, VHAI is 3.79 times more volatile than Dlocal. It trades about -0.01 of its total potential returns per unit of risk. Dlocal is currently generating about 0.18 per unit of volatility. If you would invest  855.00  in Dlocal on September 13, 2024 and sell it today you would earn a total of  327.00  from holding Dlocal or generate 38.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

VHAI  vs.  Dlocal

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, VHAI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Dlocal

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with VHAI and Dlocal

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

The idea behind VHAI and Dlocal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.