Correlation Between Loft II and Wetzel SA

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

Diversification Opportunities for Loft II and Wetzel SA

-0.47

Correlation Coefficient

Loft II  Wetzel SA

Very good diversification

The 3 months correlation between Loft and Wetzel is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and Wetzel SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wetzel SA 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 Wetzel SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wetzel SA has no effect on the direction of Loft II i.e., Loft II and Wetzel SA go up and down completely randomly.

Pair Corralation between Loft II and Wetzel SA

Assuming the 90 days trading horizon Loft II Fundo is expected to under-perform the Wetzel SA. But the fund apears to be less risky and, when comparing its historical volatility, Loft II Fundo is 1.11 times less risky than Wetzel SA. The fund trades about -0.1 of its potential returns per unit of risk. The Wetzel SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Wetzel SA on September 1, 2024 and sell it today you would earn a total of  699.00  from holding Wetzel SA or generate 87.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.9%
Values	Daily Returns

Loft II Fundo  vs.  Wetzel SA

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 December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

Wetzel SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wetzel SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wetzel SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loft II and Wetzel SA

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

The idea behind Loft II Fundo and Wetzel SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.