Correlation Between Loft II and BTG Pactual

Can any of the company-specific risk be diversified away by investing in both Loft II and BTG Pactual 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 BTG Pactual 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 BTG Pactual Logstica, you can compare the effects of market volatilities on Loft II and BTG Pactual 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 BTG Pactual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and BTG Pactual.

Diversification Opportunities for Loft II and BTG Pactual

0.72

Correlation Coefficient

Loft II  BTG Pactual

Poor diversification

The 3 months correlation between Loft and BTG is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and BTG Pactual Logstica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Pactual Logstica 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 BTG Pactual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Pactual Logstica has no effect on the direction of Loft II i.e., Loft II and BTG Pactual go up and down completely randomly.

Pair Corralation between Loft II and BTG Pactual

Assuming the 90 days trading horizon Loft II Fundo is expected to under-perform the BTG Pactual. In addition to that, Loft II is 6.3 times more volatile than BTG Pactual Logstica. It trades about -0.05 of its total potential returns per unit of risk. BTG Pactual Logstica is currently generating about 0.0 per unit of volatility. If you would invest  9,196  in BTG Pactual Logstica on September 14, 2024 and sell it today you would lose (116.00) from holding BTG Pactual Logstica or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Loft II Fundo  vs.  BTG Pactual Logstica

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 weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Pactual Logstica has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Loft II and BTG Pactual

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

The idea behind Loft II Fundo and BTG Pactual Logstica 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 Transaction History module to view history of all your transactions and understand their impact on performance.