Correlation Between LESTE FDO and Santos Brasil

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

Diversification Opportunities for LESTE FDO and Santos Brasil

-0.53

Correlation Coefficient

LESTE FDO  Santos Brasil

Excellent diversification

The 3 months correlation between LESTE and Santos is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding LESTE FDO INV and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil 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 Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of LESTE FDO i.e., LESTE FDO and Santos Brasil go up and down completely randomly.

Pair Corralation between LESTE FDO and Santos Brasil

Assuming the 90 days trading horizon LESTE FDO INV is expected to under-perform the Santos Brasil. In addition to that, LESTE FDO is 3.29 times more volatile than Santos Brasil Participaes. It trades about -0.1 of its total potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.12 per unit of volatility. If you would invest  1,270  in Santos Brasil Participaes on October 20, 2024 and sell it today you would earn a total of  44.00  from holding Santos Brasil Participaes or generate 3.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

LESTE FDO INV  vs.  Santos Brasil Participaes

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.

Santos Brasil Participaes

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Santos Brasil 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 Santos Brasil

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

The idea behind LESTE FDO INV and Santos Brasil Participaes 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.