Correlation Between Lavoro Limited and Intrepid Potash

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

By analyzing existing cross correlation between Lavoro Limited Warrant and Intrepid Potash, you can compare the effects of market volatilities on Lavoro Limited and Intrepid Potash 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 Intrepid Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lavoro Limited and Intrepid Potash.

Diversification Opportunities for Lavoro Limited and Intrepid Potash

-0.6

Correlation Coefficient

Lavoro Limited  Intrepid Potash

Excellent diversification

The 3 months correlation between Lavoro and Intrepid is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Warrant and Intrepid Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intrepid Potash 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 Warrant are associated (or correlated) with Intrepid Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intrepid Potash has no effect on the direction of Lavoro Limited i.e., Lavoro Limited and Intrepid Potash go up and down completely randomly.

Pair Corralation between Lavoro Limited and Intrepid Potash

Assuming the 90 days horizon Lavoro Limited Warrant is expected to generate 3.67 times more return on investment than Intrepid Potash. However, Lavoro Limited is 3.67 times more volatile than Intrepid Potash. It trades about 0.03 of its potential returns per unit of risk. Intrepid Potash is currently generating about -0.03 per unit of risk. If you would invest  12.00  in Lavoro Limited Warrant on November 28, 2024 and sell it today you would lose (1.00) from holding Lavoro Limited Warrant or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	79.31%
Values	Daily Returns

Lavoro Limited Warrant  vs.  Intrepid Potash

Lavoro Limited Warrant

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lavoro Limited showed solid returns over the last few months and may actually be approaching a breakup point.

Intrepid Potash

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intrepid Potash has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Intrepid Potash is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lavoro Limited and Intrepid Potash

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

The idea behind Lavoro Limited Warrant and Intrepid Potash 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.