Correlation Between Lavoro Limited and China Green

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

By analyzing existing cross correlation between Lavoro Limited Class and China Green Agriculture, you can compare the effects of market volatilities on Lavoro Limited and China Green 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 Lavoro Limited with a short position of China Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lavoro Limited and China Green.

Diversification Opportunities for Lavoro Limited and China Green

-0.37

Correlation Coefficient

Lavoro Limited  China Green

Very good diversification

The 3 months correlation between Lavoro and China is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Class and China Green Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Green Agriculture and Lavoro Limited 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 Lavoro Limited Class are associated (or correlated) with China Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Green Agriculture has no effect on the direction of Lavoro Limited i.e., Lavoro Limited and China Green go up and down completely randomly.

Pair Corralation between Lavoro Limited and China Green

Given the investment horizon of 90 days Lavoro Limited is expected to generate 3.81 times less return on investment than China Green. But when comparing it to its historical volatility, Lavoro Limited Class is 1.79 times less risky than China Green. It trades about 0.03 of its potential returns per unit of risk. China Green Agriculture is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  173.00  in China Green Agriculture on September 1, 2024 and sell it today you would earn a total of  25.00  from holding China Green Agriculture or generate 14.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Lavoro Limited Class  vs.  China Green Agriculture

Lavoro Limited Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Lavoro Limited may actually be approaching a critical reversion point that can send shares even higher in December 2024.

China Green Agriculture

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Green Agriculture are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, China Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lavoro Limited and China Green

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

The idea behind Lavoro Limited Class and China Green Agriculture 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.