Correlation Between FDO INV and Loft II

Can any of the company-specific risk be diversified away by investing in both FDO INV and Loft II 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 FDO INV and Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FDO INV IMOB and Loft II Fundo, you can compare the effects of market volatilities on FDO INV and Loft II 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 FDO INV with a short position of Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDO INV and Loft II.

Diversification Opportunities for FDO INV and Loft II

-0.77

Correlation Coefficient

FDO INV  Loft II

Pay attention - limited upside

The 3 months correlation between FDO and Loft is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding FDO INV IMOB and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo and FDO INV 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 FDO INV IMOB are associated (or correlated) with Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of FDO INV i.e., FDO INV and Loft II go up and down completely randomly.

Pair Corralation between FDO INV and Loft II

Assuming the 90 days trading horizon FDO INV IMOB is expected to generate 0.29 times more return on investment than Loft II. However, FDO INV IMOB is 3.41 times less risky than Loft II. It trades about 0.06 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.1 per unit of risk. If you would invest  138,282  in FDO INV IMOB on September 14, 2024 and sell it today you would earn a total of  6,718  from holding FDO INV IMOB or generate 4.86% return on investment over 90 days.

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

FDO INV IMOB  vs.  Loft II Fundo

FDO INV IMOB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loft II Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with FDO INV and Loft II

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

The idea behind FDO INV IMOB and Loft II Fundo 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.