Correlation Between LESTE FDO and Indstrias Romi

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

Diversification Opportunities for LESTE FDO and Indstrias Romi

0.06

Correlation Coefficient

LESTE FDO  Indstrias Romi

Significant diversification

The 3 months correlation between LESTE and Indstrias is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Indstrias Romi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indstrias Romi SA 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 Indstrias Romi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indstrias Romi SA has no effect on the direction of LESTE FDO i.e., LESTE FDO and Indstrias Romi go up and down completely randomly.

Pair Corralation between LESTE FDO and Indstrias Romi

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the Indstrias Romi. But the fund apears to be less risky and, when comparing its historical volatility, LESTE FDO INV is 1.29 times less risky than Indstrias Romi. The fund trades about -0.02 of its potential returns per unit of risk. The Indstrias Romi SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  886.00  in Indstrias Romi SA on December 4, 2024 and sell it today you would earn a total of  42.00  from holding Indstrias Romi SA or generate 4.74% return on investment over 90 days.

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

LESTE FDO INV  vs.  Indstrias Romi SA

LESTE FDO INV

Risk-Adjusted Performance

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, LESTE FDO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Indstrias Romi SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indstrias Romi SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Indstrias Romi 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 LESTE FDO and Indstrias Romi

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

The idea behind LESTE FDO INV and Indstrias Romi 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.