Correlation Between E I and Lavoro Limited

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

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

Diversification Opportunities for E I and Lavoro Limited

-0.17

Correlation Coefficient

E I  Lavoro Limited

Good diversification

The 3 months correlation between CTA-PB and Lavoro is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding E I du 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 E I 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 E I du 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 E I i.e., E I and Lavoro Limited go up and down completely randomly.

Pair Corralation between E I and Lavoro Limited

Assuming the 90 days trading horizon E I du is expected to generate 0.14 times more return on investment than Lavoro Limited. However, E I du is 7.1 times less risky than Lavoro Limited. It trades about 0.08 of its potential returns per unit of risk. Lavoro Limited Class is currently generating about -0.09 per unit of risk. If you would invest  6,971  in E I du on December 22, 2024 and sell it today you would earn a total of  258.00  from holding E I du or generate 3.7% return on investment over 90 days.

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

E I du  vs.  Lavoro Limited Class

E I du

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E I du are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lavoro Limited Class

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with E I and Lavoro Limited

The main advantage of trading using opposite E I and Lavoro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E I 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 E I du 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.