Correlation Between Basic Materials and Localiza Rent
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Localiza Rent 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 Localiza Rent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Localiza Rent a, you can compare the effects of market volatilities on Basic Materials and Localiza Rent 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 Localiza Rent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Localiza Rent.
Diversification Opportunities for Basic Materials and Localiza Rent
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Localiza is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Localiza Rent a in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Localiza Rent a 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 Localiza Rent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Localiza Rent a has no effect on the direction of Basic Materials i.e., Basic Materials and Localiza Rent go up and down completely randomly.
Pair Corralation between Basic Materials and Localiza Rent
Assuming the 90 days trading horizon Basic Materials is expected to generate 12.26 times less return on investment than Localiza Rent. But when comparing it to its historical volatility, Basic Materials is 2.67 times less risky than Localiza Rent. It trades about 0.01 of its potential returns per unit of risk. Localiza Rent a is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,238 in Localiza Rent a on August 28, 2024 and sell it today you would earn a total of 115.00 from holding Localiza Rent a or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. Localiza Rent a
Performance |
| Timeline |
Basic Materials and Localiza Rent Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Localiza Rent a
Pair trading matchups for Localiza Rent
Pair Trading with Basic Materials and Localiza Rent
The main advantage of trading using opposite Basic Materials and Localiza Rent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Localiza Rent 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 Localiza Rent will offset losses from the drop in Localiza Rent's long position.| Basic Materials vs. Bio Techne | Basic Materials vs. Charter Communications | Basic Materials vs. Metalrgica Riosulense SA | Basic Materials vs. Marvell Technology |
| Localiza Rent vs. METISA Metalrgica Timboense | Localiza Rent vs. Lupatech SA | Localiza Rent vs. Recrusul SA | Localiza Rent vs. Fras le SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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