Correlation Between LESTE FDO and FDO INV

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

Diversification Opportunities for LESTE FDO and FDO INV

-0.64

Correlation Coefficient

LESTE FDO  FDO INV

Excellent diversification

The 3 months correlation between LESTE and FDO is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and FDO INV IMOB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO INV IMOB 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 FDO INV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO INV IMOB has no effect on the direction of LESTE FDO i.e., LESTE FDO and FDO INV go up and down completely randomly.

Pair Corralation between LESTE FDO and FDO INV

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the FDO INV. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 1.05 times less risky than FDO INV. The fund trades about -0.12 of its potential returns per unit of risk. The FDO INV IMOB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  137,884  in FDO INV IMOB on September 12, 2024 and sell it today you would earn a total of  7,116  from holding FDO INV IMOB or generate 5.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

LESTE FDO INV  vs.  FDO INV IMOB

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.

FDO INV IMOB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FDO INV IMOB are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FDO INV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LESTE FDO and FDO INV

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

The idea behind LESTE FDO INV and FDO INV IMOB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.