Correlation Between Loft II and Imob I
Can any of the company-specific risk be diversified away by investing in both Loft II and Imob I 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 Loft II and Imob I into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loft II Fundo and Imob I Fundo, you can compare the effects of market volatilities on Loft II and Imob I 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 Loft II with a short position of Imob I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and Imob I.
Diversification Opportunities for Loft II and Imob I
Poor diversification
The 3 months correlation between Loft and Imob is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and Imob I Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imob I Fundo and Loft II 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 Loft II Fundo are associated (or correlated) with Imob I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imob I Fundo has no effect on the direction of Loft II i.e., Loft II and Imob I go up and down completely randomly.
Pair Corralation between Loft II and Imob I
Assuming the 90 days trading horizon Loft II Fundo is expected to under-perform the Imob I. In addition to that, Loft II is 4.26 times more volatile than Imob I Fundo. It trades about -0.06 of its total potential returns per unit of risk. Imob I Fundo is currently generating about -0.19 per unit of volatility. If you would invest 8,168 in Imob I Fundo on August 30, 2024 and sell it today you would lose (796.00) from holding Imob I Fundo or give up 9.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Loft II Fundo vs. Imob I Fundo
Performance |
| Timeline |
| Loft II Fundo |
| Imob I Fundo |
Loft II and Imob I Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loft II and Imob I
The main advantage of trading using opposite Loft II and Imob I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loft II position performs unexpectedly, Imob I 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 Imob I will offset losses from the drop in Imob I's long position.| Loft II vs. Energisa SA | Loft II vs. BTG Pactual Logstica | Loft II vs. Plano Plano Desenvolvimento | Loft II vs. The Procter Gamble |
| Imob I vs. Energisa SA | Imob I vs. BTG Pactual Logstica | Imob I vs. Plano Plano Desenvolvimento | Imob I vs. The Procter Gamble |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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