Correlation Between StoneCo and Dlocal
Can any of the company-specific risk be diversified away by investing in both StoneCo and Dlocal 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 StoneCo and Dlocal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between StoneCo and Dlocal, you can compare the effects of market volatilities on StoneCo and Dlocal 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 StoneCo with a short position of Dlocal. Check out your portfolio center. Please also check ongoing floating volatility patterns of StoneCo and Dlocal.
Diversification Opportunities for StoneCo and Dlocal
Excellent diversification
The 3 months correlation between StoneCo and Dlocal is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Dlocal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dlocal and StoneCo 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 StoneCo are associated (or correlated) with Dlocal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dlocal has no effect on the direction of StoneCo i.e., StoneCo and Dlocal go up and down completely randomly.
Pair Corralation between StoneCo and Dlocal
Given the investment horizon of 90 days StoneCo is expected to generate 1.64 times less return on investment than Dlocal. But when comparing it to its historical volatility, StoneCo is 1.29 times less risky than Dlocal. It trades about 0.01 of its potential returns per unit of risk. Dlocal is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,291 in Dlocal on August 24, 2024 and sell it today you would lose (196.00) from holding Dlocal or give up 15.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
StoneCo vs. Dlocal
Performance |
| Timeline |
| StoneCo |
| Dlocal |
StoneCo and Dlocal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with StoneCo and Dlocal
The main advantage of trading using opposite StoneCo and Dlocal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if StoneCo position performs unexpectedly, Dlocal 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 Dlocal will offset losses from the drop in Dlocal's long position.The idea behind StoneCo and Dlocal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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