Correlation Between Lupatech and Plano Plano

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

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

Diversification Opportunities for Lupatech and Plano Plano

0.81

Correlation Coefficient

Lupatech  Plano Plano

Very poor diversification

The 3 months correlation between Lupatech and Plano is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA 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 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 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 Lupatech i.e., Lupatech and Plano Plano go up and down completely randomly.

Pair Corralation between Lupatech and Plano Plano

Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the Plano Plano. But the stock apears to be less risky and, when comparing its historical volatility, Lupatech SA is 1.41 times less risky than Plano Plano. The stock trades about -0.03 of its potential returns per unit of risk. The Plano Plano Desenvolvimento is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,180  in Plano Plano Desenvolvimento on November 20, 2024 and sell it today you would lose (64.00) from holding Plano Plano Desenvolvimento or give up 5.42% of portfolio value over 90 days.

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

Lupatech SA  vs.  Plano Plano Desenvolvimento

Lupatech SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lupatech is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Plano Plano Desenvol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plano Plano Desenvolvimento has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Plano Plano is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lupatech and Plano Plano

The main advantage of trading using opposite Lupatech and Plano Plano positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lupatech 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 Lupatech SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.