Correlation Between Magazine Luiza and Localiza Rent
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza 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 Magazine Luiza and Localiza Rent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magazine Luiza SA and Localiza Rent a, you can compare the effects of market volatilities on Magazine Luiza 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 Magazine Luiza with a short position of Localiza Rent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Localiza Rent.
Diversification Opportunities for Magazine Luiza and Localiza Rent
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magazine and Localiza is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA 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 Magazine Luiza 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 Magazine Luiza SA 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 Magazine Luiza i.e., Magazine Luiza and Localiza Rent go up and down completely randomly.
Pair Corralation between Magazine Luiza and Localiza Rent
Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the Localiza Rent. In addition to that, Magazine Luiza is 1.54 times more volatile than Localiza Rent a. It trades about -0.09 of its total potential returns per unit of risk. Localiza Rent a is currently generating about -0.08 per unit of volatility. If you would invest 5,882 in Localiza Rent a on November 9, 2024 and sell it today you would lose (2,693) from holding Localiza Rent a or give up 45.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magazine Luiza SA vs. Localiza Rent a
Performance |
| Timeline |
| Magazine Luiza SA |
| Localiza Rent a |
Magazine Luiza and Localiza Rent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magazine Luiza and Localiza Rent
The main advantage of trading using opposite Magazine Luiza and Localiza Rent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza 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.| Magazine Luiza vs. WEG SA | Magazine Luiza vs. Vale SA | Magazine Luiza vs. Itasa Investimentos | Magazine Luiza vs. Ita Unibanco Holding |
| Localiza Rent vs. Lojas Renner SA | Localiza Rent vs. Raia Drogasil SA | Localiza Rent vs. Equatorial Energia SA | Localiza Rent vs. CCR 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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