Correlation Between Loft II and Brio Real

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

By analyzing existing cross correlation between Loft II Fundo and Brio Real Estate, you can compare the effects of market volatilities on Loft II and Brio Real 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 Loft II with a short position of Brio Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and Brio Real.

Diversification Opportunities for Loft II and Brio Real

-0.52

Correlation Coefficient

Loft II  Brio Real

Excellent diversification

The 3 months correlation between Loft and Brio is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and Brio Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brio Real Estate and Loft II 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 Loft II Fundo are associated (or correlated) with Brio Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brio Real Estate has no effect on the direction of Loft II i.e., Loft II and Brio Real go up and down completely randomly.

Pair Corralation between Loft II and Brio Real

Assuming the 90 days trading horizon Loft II Fundo is expected to generate 0.56 times more return on investment than Brio Real. However, Loft II Fundo is 1.78 times less risky than Brio Real. It trades about 0.15 of its potential returns per unit of risk. Brio Real Estate is currently generating about 0.06 per unit of risk. If you would invest  790.00  in Loft II Fundo on October 8, 2024 and sell it today you would earn a total of  30.00  from holding Loft II Fundo or generate 3.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.24%
Values	Daily Returns

Loft II Fundo  vs.  Brio Real Estate

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

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

Brio Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brio Real Estate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong forward indicators, Brio Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Loft II and Brio Real

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

The idea behind Loft II Fundo and Brio Real Estate 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.