Correlation Between Basic Materials and Loft II
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Loft II Fundo, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Loft II.
Diversification Opportunities for Basic Materials and Loft II
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Basic and Loft is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials 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 Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Loft II go up and down completely randomly.
Pair Corralation between Basic Materials and Loft II
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.23 times more return on investment than Loft II. However, Basic Materials is 4.36 times less risky than Loft II. It trades about 0.07 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.1 per unit of risk. If you would invest 556,361 in Basic Materials on September 2, 2024 and sell it today you would earn a total of 31,049 from holding Basic Materials or generate 5.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 92.31% |
| Values | Daily Returns |
Basic Materials vs. Loft II Fundo
Performance |
| Timeline |
Basic Materials and Loft II Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Loft II Fundo
Pair trading matchups for Loft II
Pair Trading with Basic Materials and Loft II
The main advantage of trading using opposite Basic Materials and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. Uber Technologies | Basic Materials vs. Palantir Technologies | Basic Materials vs. Marvell Technology | Basic Materials vs. Align Technology |
| Loft II vs. Domo Fundo de | Loft II vs. Aesapar Fundo de | Loft II vs. Ourinvest Jpp Fundo | Loft II vs. Kinea Hedge Fund |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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