Correlation Between Lupatech and Movida Participaes

Can any of the company-specific risk be diversified away by investing in both Lupatech and Movida Participaes 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 Lupatech and Movida Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lupatech SA and Movida Participaes SA, you can compare the effects of market volatilities on Lupatech and Movida Participaes 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 Lupatech with a short position of Movida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lupatech and Movida Participaes.

Diversification Opportunities for Lupatech and Movida Participaes

0.49

Correlation Coefficient

Lupatech  Movida Participaes

Very weak diversification

The 3 months correlation between Lupatech and Movida is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and Movida Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Movida Participaes and Lupatech 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 Lupatech SA are associated (or correlated) with Movida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Movida Participaes has no effect on the direction of Lupatech i.e., Lupatech and Movida Participaes go up and down completely randomly.

Pair Corralation between Lupatech and Movida Participaes

Assuming the 90 days trading horizon Lupatech is expected to generate 3.23 times less return on investment than Movida Participaes. But when comparing it to its historical volatility, Lupatech SA is 1.52 times less risky than Movida Participaes. It trades about 0.07 of its potential returns per unit of risk. Movida Participaes SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Movida Participaes SA on December 29, 2024 and sell it today you would earn a total of  156.00  from holding Movida Participaes SA or generate 44.07% return on investment over 90 days.

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

Lupatech SA  vs.  Movida Participaes SA

Lupatech SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lupatech SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lupatech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Movida Participaes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Movida Participaes SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Movida Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lupatech and Movida Participaes

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

The idea behind Lupatech SA and Movida Participaes 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.