Correlation Between Faria Lima and FUNDO DE

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

By analyzing existing cross correlation between Faria Lima Capital and FUNDO DE INVESTIMENTO, you can compare the effects of market volatilities on Faria Lima and FUNDO DE 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 Faria Lima with a short position of FUNDO DE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faria Lima and FUNDO DE.

Diversification Opportunities for Faria Lima and FUNDO DE

0.19

Correlation Coefficient

Faria Lima  FUNDO DE

Average diversification

The 3 months correlation between Faria and FUNDO is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Faria Lima Capital and FUNDO DE INVESTIMENTO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUNDO DE INVESTIMENTO and Faria Lima 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 Faria Lima Capital are associated (or correlated) with FUNDO DE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUNDO DE INVESTIMENTO has no effect on the direction of Faria Lima i.e., Faria Lima and FUNDO DE go up and down completely randomly.

Pair Corralation between Faria Lima and FUNDO DE

Assuming the 90 days trading horizon Faria Lima Capital is expected to generate 0.54 times more return on investment than FUNDO DE. However, Faria Lima Capital is 1.85 times less risky than FUNDO DE. It trades about -0.04 of its potential returns per unit of risk. FUNDO DE INVESTIMENTO is currently generating about -0.03 per unit of risk. If you would invest  9,852  in Faria Lima Capital on December 30, 2024 and sell it today you would lose (159.00) from holding Faria Lima Capital or give up 1.61% of portfolio value over 90 days.

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

Faria Lima Capital  vs.  FUNDO DE INVESTIMENTO

Faria Lima Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Faria Lima Capital has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, Faria Lima is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FUNDO DE INVESTIMENTO

Risk-Adjusted Performance

Very Weak

Over the last 90 days FUNDO DE INVESTIMENTO has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, FUNDO DE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Faria Lima and FUNDO DE

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

The idea behind Faria Lima Capital and FUNDO DE INVESTIMENTO 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.

Check out your portfolio center.

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.