Correlation Between Abercrombie Fitch and Lavoro Limited

Can any of the company-specific risk be diversified away by investing in both Abercrombie Fitch and Lavoro Limited 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 Abercrombie Fitch and Lavoro Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Abercrombie Fitch and Lavoro Limited Class, you can compare the effects of market volatilities on Abercrombie Fitch and Lavoro Limited 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 Abercrombie Fitch with a short position of Lavoro Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abercrombie Fitch and Lavoro Limited.

Diversification Opportunities for Abercrombie Fitch and Lavoro Limited

0.45

Correlation Coefficient

Abercrombie Fitch  Lavoro Limited

Very weak diversification

The 3 months correlation between Abercrombie and Lavoro is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Abercrombie Fitch and Lavoro Limited Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lavoro Limited Class and Abercrombie Fitch 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 Abercrombie Fitch are associated (or correlated) with Lavoro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lavoro Limited Class has no effect on the direction of Abercrombie Fitch i.e., Abercrombie Fitch and Lavoro Limited go up and down completely randomly.

Pair Corralation between Abercrombie Fitch and Lavoro Limited

Considering the 90-day investment horizon Abercrombie Fitch is expected to generate 0.69 times more return on investment than Lavoro Limited. However, Abercrombie Fitch is 1.45 times less risky than Lavoro Limited. It trades about -0.18 of its potential returns per unit of risk. Lavoro Limited Class is currently generating about -0.23 per unit of risk. If you would invest  15,207  in Abercrombie Fitch on October 25, 2024 and sell it today you would lose (2,350) from holding Abercrombie Fitch or give up 15.45% of portfolio value over 90 days.

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

Abercrombie Fitch  vs.  Lavoro Limited Class

Abercrombie Fitch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abercrombie Fitch has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lavoro Limited Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lavoro Limited Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lavoro Limited is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Abercrombie Fitch and Lavoro Limited

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

The idea behind Abercrombie Fitch and Lavoro Limited Class 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.