Correlation Between LPS Brasil and Dimed SA

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

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

Diversification Opportunities for LPS Brasil and Dimed SA

0.1

Correlation Coefficient

LPS Brasil  Dimed SA

Average diversification

The 3 months correlation between LPS and Dimed is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding LPS Brasil and Dimed SA Distribuidora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimed SA Distribuidora and LPS Brasil 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 LPS Brasil are associated (or correlated) with Dimed SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimed SA Distribuidora has no effect on the direction of LPS Brasil i.e., LPS Brasil and Dimed SA go up and down completely randomly.

Pair Corralation between LPS Brasil and Dimed SA

Assuming the 90 days trading horizon LPS Brasil is expected to generate 2.62 times more return on investment than Dimed SA. However, LPS Brasil is 2.62 times more volatile than Dimed SA Distribuidora. It trades about 0.05 of its potential returns per unit of risk. Dimed SA Distribuidora is currently generating about -0.05 per unit of risk. If you would invest  155.00  in LPS Brasil on September 3, 2024 and sell it today you would earn a total of  10.00  from holding LPS Brasil or generate 6.45% return on investment over 90 days.

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

LPS Brasil   vs.  Dimed SA Distribuidora

LPS Brasil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LPS Brasil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LPS Brasil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dimed SA Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimed SA Distribuidora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimed SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LPS Brasil and Dimed SA

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

The idea behind LPS Brasil and Dimed SA Distribuidora 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.