Correlation Between LESTE FDO and Ambipar Participaes

Can any of the company-specific risk be diversified away by investing in both LESTE FDO and Ambipar Participaes 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 LESTE FDO and Ambipar Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LESTE FDO INV and Ambipar Participaes e, you can compare the effects of market volatilities on LESTE FDO and Ambipar Participaes 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 LESTE FDO with a short position of Ambipar Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of LESTE FDO and Ambipar Participaes.

Diversification Opportunities for LESTE FDO and Ambipar Participaes

-0.69

Correlation Coefficient

LESTE FDO  Ambipar Participaes

Excellent diversification

The 3 months correlation between LESTE and Ambipar is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Ambipar Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambipar Participaes and LESTE FDO 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 LESTE FDO INV are associated (or correlated) with Ambipar Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambipar Participaes has no effect on the direction of LESTE FDO i.e., LESTE FDO and Ambipar Participaes go up and down completely randomly.

Pair Corralation between LESTE FDO and Ambipar Participaes

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the Ambipar Participaes. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 5.4 times less risky than Ambipar Participaes. The fund trades about -0.12 of its potential returns per unit of risk. The Ambipar Participaes e is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6,700  in Ambipar Participaes e on September 12, 2024 and sell it today you would earn a total of  12,850  from holding Ambipar Participaes e or generate 191.79% return on investment over 90 days.

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

LESTE FDO INV  vs.  Ambipar Participaes e

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ambipar Participaes

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambipar Participaes e are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ambipar Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LESTE FDO and Ambipar Participaes

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

The idea behind LESTE FDO INV and Ambipar Participaes e 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.