Correlation Between LPS Brasil and PBG SA

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

Diversification Opportunities for LPS Brasil and PBG SA

-0.26

Correlation Coefficient

LPS Brasil  PBG SA

Very good diversification

The 3 months correlation between LPS and PBG is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding LPS Brasil and PBG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBG SA 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 PBG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBG SA has no effect on the direction of LPS Brasil i.e., LPS Brasil and PBG SA go up and down completely randomly.

Pair Corralation between LPS Brasil and PBG SA

Assuming the 90 days trading horizon LPS Brasil is expected to generate 5.13 times less return on investment than PBG SA. But when comparing it to its historical volatility, LPS Brasil is 1.07 times less risky than PBG SA. It trades about 0.0 of its potential returns per unit of risk. PBG SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  366.00  in PBG SA on December 28, 2024 and sell it today you would earn a total of  3.00  from holding PBG SA or generate 0.82% return on investment over 90 days.

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

LPS Brasil   vs.  PBG SA

LPS Brasil

Risk-Adjusted Performance

Very Weak

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

PBG SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PBG SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PBG 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 PBG SA

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

The idea behind LPS Brasil and PBG 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.