Correlation Between Amazonas Florestal and Labor Smart

Can any of the company-specific risk be diversified away by investing in both Amazonas Florestal and Labor Smart 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 Amazonas Florestal and Labor Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazonas Florestal and Labor Smart, you can compare the effects of market volatilities on Amazonas Florestal and Labor Smart 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 Amazonas Florestal with a short position of Labor Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazonas Florestal and Labor Smart.

Diversification Opportunities for Amazonas Florestal and Labor Smart

-0.18

Correlation Coefficient

Amazonas Florestal  Labor Smart

Good diversification

The 3 months correlation between Amazonas and Labor is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Amazonas Florestal and Labor Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labor Smart and Amazonas Florestal 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 Amazonas Florestal are associated (or correlated) with Labor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labor Smart has no effect on the direction of Amazonas Florestal i.e., Amazonas Florestal and Labor Smart go up and down completely randomly.

Pair Corralation between Amazonas Florestal and Labor Smart

Given the investment horizon of 90 days Amazonas Florestal is expected to under-perform the Labor Smart. In addition to that, Amazonas Florestal is 3.4 times more volatile than Labor Smart. It trades about -0.22 of its total potential returns per unit of risk. Labor Smart is currently generating about -0.08 per unit of volatility. If you would invest  0.21  in Labor Smart on September 4, 2024 and sell it today you would lose (0.03) from holding Labor Smart or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Amazonas Florestal  vs.  Labor Smart

Amazonas Florestal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazonas Florestal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Amazonas Florestal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Labor Smart

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Labor Smart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Labor Smart exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazonas Florestal and Labor Smart

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

The idea behind Amazonas Florestal and Labor Smart 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.