Correlation Between ENFY and Lavoro Limited

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

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

Diversification Opportunities for ENFY and Lavoro Limited

-0.44

Correlation Coefficient

ENFY  Lavoro Limited

Very good diversification

The 3 months correlation between ENFY and Lavoro is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ENFY 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 ENFY 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 ENFY 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 ENFY i.e., ENFY and Lavoro Limited go up and down completely randomly.

Pair Corralation between ENFY and Lavoro Limited

Given the investment horizon of 90 days ENFY is expected to generate 1.45 times more return on investment than Lavoro Limited. However, ENFY is 1.45 times more volatile than Lavoro Limited Class. It trades about -0.01 of its potential returns per unit of risk. Lavoro Limited Class is currently generating about -0.01 per unit of risk. If you would invest  480.00  in ENFY on September 4, 2024 and sell it today you would lose (321.00) from holding ENFY or give up 66.87% of portfolio value over 90 days.

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

ENFY  vs.  Lavoro Limited Class

ENFY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENFY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, ENFY showed solid returns over the last few months and may actually be approaching a breakup point.

Lavoro Limited Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Lavoro Limited may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ENFY and Lavoro Limited

The main advantage of trading using opposite ENFY and Lavoro Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENFY 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 ENFY 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.