Correlation Between LESTE FDO and Plano Plano

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

Diversification Opportunities for LESTE FDO and Plano Plano

0.59

Correlation Coefficient

LESTE FDO  Plano Plano

Very weak diversification

The 3 months correlation between LESTE and Plano is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Plano Plano Desenvolvimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plano Plano Desenvol 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 Plano Plano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plano Plano Desenvol has no effect on the direction of LESTE FDO i.e., LESTE FDO and Plano Plano go up and down completely randomly.

Pair Corralation between LESTE FDO and Plano Plano

Assuming the 90 days trading horizon LESTE FDO is expected to generate 2.88 times less return on investment than Plano Plano. But when comparing it to its historical volatility, LESTE FDO INV is 2.68 times less risky than Plano Plano. It trades about 0.18 of its potential returns per unit of risk. Plano Plano Desenvolvimento is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  834.00  in Plano Plano Desenvolvimento on December 30, 2024 and sell it today you would earn a total of  382.00  from holding Plano Plano Desenvolvimento or generate 45.8% 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.  Plano Plano Desenvolvimento

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.

Plano Plano Desenvol

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plano Plano Desenvolvimento are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Plano Plano unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LESTE FDO and Plano Plano

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

The idea behind LESTE FDO INV and Plano Plano Desenvolvimento 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.