Correlation Between Clave Indices and Loft II

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

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

Diversification Opportunities for Clave Indices and Loft II

0.56

Correlation Coefficient

Clave Indices  Loft II

Very weak diversification

The 3 months correlation between Clave and Loft is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Clave Indices De 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 Clave Indices 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 Clave Indices De 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 Clave Indices i.e., Clave Indices and Loft II go up and down completely randomly.

Pair Corralation between Clave Indices and Loft II

Assuming the 90 days trading horizon Clave Indices De is expected to generate 1.01 times more return on investment than Loft II. However, Clave Indices is 1.01 times more volatile than Loft II Fundo. It trades about 0.01 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.02 per unit of risk. If you would invest  8,484  in Clave Indices De on October 6, 2024 and sell it today you would earn a total of  11.00  from holding Clave Indices De or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.47%
Values	Daily Returns

Clave Indices De  vs.  Loft II Fundo

Clave Indices De

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clave Indices De has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 somewhat strong basic indicators, Loft II is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clave Indices and Loft II

The main advantage of trading using opposite Clave Indices and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clave Indices 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 Clave Indices De 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.