Correlation Between LIFE CAPITAL and SPARTA INFRA
Can any of the company-specific risk be diversified away by investing in both LIFE CAPITAL and SPARTA INFRA 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 LIFE CAPITAL and SPARTA INFRA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIFE CAPITAL PARTNERS and SPARTA INFRA FIC, you can compare the effects of market volatilities on LIFE CAPITAL and SPARTA INFRA 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 LIFE CAPITAL with a short position of SPARTA INFRA. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE CAPITAL and SPARTA INFRA.
Diversification Opportunities for LIFE CAPITAL and SPARTA INFRA
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between LIFE and SPARTA is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LIFE CAPITAL PARTNERS and SPARTA INFRA FIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTA INFRA FIC and LIFE CAPITAL 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 LIFE CAPITAL PARTNERS are associated (or correlated) with SPARTA INFRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTA INFRA FIC has no effect on the direction of LIFE CAPITAL i.e., LIFE CAPITAL and SPARTA INFRA go up and down completely randomly.
Pair Corralation between LIFE CAPITAL and SPARTA INFRA
Assuming the 90 days trading horizon LIFE CAPITAL PARTNERS is expected to generate 1.9 times more return on investment than SPARTA INFRA. However, LIFE CAPITAL is 1.9 times more volatile than SPARTA INFRA FIC. It trades about -0.03 of its potential returns per unit of risk. SPARTA INFRA FIC is currently generating about -0.11 per unit of risk. If you would invest 995.00 in LIFE CAPITAL PARTNERS on September 1, 2024 and sell it today you would lose (40.00) from holding LIFE CAPITAL PARTNERS or give up 4.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.22% |
| Values | Daily Returns |
LIFE CAPITAL PARTNERS vs. SPARTA INFRA FIC
Performance |
| Timeline |
| LIFE CAPITAL PARTNERS |
| SPARTA INFRA FIC |
LIFE CAPITAL and SPARTA INFRA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LIFE CAPITAL and SPARTA INFRA
The main advantage of trading using opposite LIFE CAPITAL and SPARTA INFRA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE CAPITAL position performs unexpectedly, SPARTA INFRA 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 SPARTA INFRA will offset losses from the drop in SPARTA INFRA's long position.| LIFE CAPITAL vs. Energisa SA | LIFE CAPITAL vs. BTG Pactual Logstica | LIFE CAPITAL vs. Plano Plano Desenvolvimento | LIFE CAPITAL vs. Companhia Habitasul de |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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