Correlation Between EZTEC Empreendimentos and LPS Brasil

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

By analyzing existing cross correlation between EZTEC Empreendimentos e and LPS Brasil , you can compare the effects of market volatilities on EZTEC Empreendimentos and LPS Brasil 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 EZTEC Empreendimentos with a short position of LPS Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of EZTEC Empreendimentos and LPS Brasil.

Diversification Opportunities for EZTEC Empreendimentos and LPS Brasil

0.24

Correlation Coefficient

EZTEC Empreendimentos  LPS Brasil

Modest diversification

The 3 months correlation between EZTEC and LPS is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding EZTEC Empreendimentos e and LPS Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPS Brasil and EZTEC Empreendimentos 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 EZTEC Empreendimentos e are associated (or correlated) with LPS Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPS Brasil has no effect on the direction of EZTEC Empreendimentos i.e., EZTEC Empreendimentos and LPS Brasil go up and down completely randomly.

Pair Corralation between EZTEC Empreendimentos and LPS Brasil

Assuming the 90 days trading horizon EZTEC Empreendimentos e is expected to generate 1.0 times more return on investment than LPS Brasil. However, EZTEC Empreendimentos e is 1.0 times less risky than LPS Brasil. It trades about -0.11 of its potential returns per unit of risk. LPS Brasil is currently generating about -0.13 per unit of risk. If you would invest  1,392  in EZTEC Empreendimentos e on September 16, 2024 and sell it today you would lose (258.00) from holding EZTEC Empreendimentos e or give up 18.53% of portfolio value over 90 days.

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

EZTEC Empreendimentos e  vs.  LPS Brasil

EZTEC Empreendimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EZTEC Empreendimentos e has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LPS Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LPS Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with EZTEC Empreendimentos and LPS Brasil

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

The idea behind EZTEC Empreendimentos e and LPS Brasil 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.