Correlation Between LESTE FDO and LIFE CAPITAL

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

Diversification Opportunities for LESTE FDO and LIFE CAPITAL

0.45

Correlation Coefficient

LESTE FDO  LIFE CAPITAL

Very weak diversification

The 3 months correlation between LESTE and LIFE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and LIFE CAPITAL PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFE CAPITAL PARTNERS 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 LIFE CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFE CAPITAL PARTNERS has no effect on the direction of LESTE FDO i.e., LESTE FDO and LIFE CAPITAL go up and down completely randomly.

Pair Corralation between LESTE FDO and LIFE CAPITAL

Assuming the 90 days trading horizon LESTE FDO INV is expected to generate 0.46 times more return on investment than LIFE CAPITAL. However, LESTE FDO INV is 2.17 times less risky than LIFE CAPITAL. It trades about 0.18 of its potential returns per unit of risk. LIFE CAPITAL PARTNERS is currently generating about 0.04 per unit of risk. If you would invest  6,601  in LESTE FDO INV on December 30, 2024 and sell it today you would earn a total of  978.00  from holding LESTE FDO INV or generate 14.82% return on investment over 90 days.

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

LESTE FDO INV  vs.  LIFE CAPITAL PARTNERS

LESTE FDO INV

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LESTE FDO INV are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, LESTE FDO sustained solid returns over the last few months and may actually be approaching a breakup point.

LIFE CAPITAL PARTNERS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LIFE CAPITAL PARTNERS are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak technical and fundamental indicators, LIFE CAPITAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LESTE FDO and LIFE CAPITAL

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

The idea behind LESTE FDO INV and LIFE CAPITAL PARTNERS 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.