Correlation Between Manufatura and Lennar

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

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

Diversification Opportunities for Manufatura and Lennar

-0.55

Correlation Coefficient

Manufatura  Lennar

Excellent diversification

The 3 months correlation between Manufatura and Lennar is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Manufatura de Brinquedos and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Manufatura 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 Manufatura de Brinquedos are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Manufatura i.e., Manufatura and Lennar go up and down completely randomly.

Pair Corralation between Manufatura and Lennar

Assuming the 90 days trading horizon Manufatura de Brinquedos is expected to generate 23.49 times more return on investment than Lennar. However, Manufatura is 23.49 times more volatile than Lennar. It trades about 0.04 of its potential returns per unit of risk. Lennar is currently generating about 0.07 per unit of risk. If you would invest  400.00  in Manufatura de Brinquedos on October 23, 2024 and sell it today you would lose (50.00) from holding Manufatura de Brinquedos or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.02%
Values	Daily Returns

Manufatura de Brinquedos  vs.  Lennar

Manufatura de Brinquedos

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manufatura de Brinquedos are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Manufatura may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Manufatura and Lennar

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

The idea behind Manufatura de Brinquedos and Lennar 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.