Correlation Between Ambipar Participaes and LPS Brasil

Can any of the company-specific risk be diversified away by investing in both Ambipar Participaes and LPS Brasil 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 Ambipar Participaes and LPS Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambipar Participaes e and LPS Brasil , you can compare the effects of market volatilities on Ambipar Participaes and LPS Brasil 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 Ambipar Participaes with a short position of LPS Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambipar Participaes and LPS Brasil.

Diversification Opportunities for Ambipar Participaes and LPS Brasil

-0.29

Correlation Coefficient

Ambipar Participaes  LPS Brasil

Very good diversification

The 3 months correlation between Ambipar and LPS is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ambipar Participaes e and LPS Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPS Brasil and Ambipar Participaes 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 Ambipar Participaes e are associated (or correlated) with LPS Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPS Brasil has no effect on the direction of Ambipar Participaes i.e., Ambipar Participaes and LPS Brasil go up and down completely randomly.

Pair Corralation between Ambipar Participaes and LPS Brasil

Assuming the 90 days trading horizon Ambipar Participaes e is expected to generate 1.69 times more return on investment than LPS Brasil. However, Ambipar Participaes is 1.69 times more volatile than LPS Brasil . It trades about 0.29 of its potential returns per unit of risk. LPS Brasil is currently generating about 0.05 per unit of risk. If you would invest  6,300  in Ambipar Participaes e on September 3, 2024 and sell it today you would earn a total of  9,799  from holding Ambipar Participaes e or generate 155.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ambipar Participaes e  vs.  LPS Brasil

Ambipar Participaes

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambipar Participaes e are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambipar Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

LPS Brasil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPS Brasil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LPS Brasil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ambipar Participaes and LPS Brasil

The main advantage of trading using opposite Ambipar Participaes and LPS Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambipar Participaes position performs unexpectedly, LPS Brasil 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 LPS Brasil will offset losses from the drop in LPS Brasil's long position.

The idea behind Ambipar Participaes e and LPS Brasil 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.