Correlation Between Lavoro Limited and CVR Partners

Can any of the company-specific risk be diversified away by investing in both Lavoro Limited and CVR Partners 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 CVR Partners 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 CVR Partners LP, you can compare the effects of market volatilities on Lavoro Limited and CVR Partners 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 CVR Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lavoro Limited and CVR Partners.

Diversification Opportunities for Lavoro Limited and CVR Partners

-0.33

Correlation Coefficient

Lavoro Limited  CVR Partners

Very good diversification

The 3 months correlation between Lavoro and CVR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lavoro Limited Warrant and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP 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 CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of Lavoro Limited i.e., Lavoro Limited and CVR Partners go up and down completely randomly.

Pair Corralation between Lavoro Limited and CVR Partners

Assuming the 90 days horizon Lavoro Limited Warrant is expected to under-perform the CVR Partners. In addition to that, Lavoro Limited is 5.58 times more volatile than CVR Partners LP. It trades about -0.03 of its total potential returns per unit of risk. CVR Partners LP is currently generating about 0.06 per unit of volatility. If you would invest  6,135  in CVR Partners LP on December 2, 2024 and sell it today you would earn a total of  1,644  from holding CVR Partners LP or generate 26.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.75%
Values	Daily Returns

Lavoro Limited Warrant  vs.  CVR Partners LP

Lavoro Limited Warrant

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lavoro Limited Warrant are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Lavoro Limited showed solid returns over the last few months and may actually be approaching a breakup point.

CVR Partners LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVR Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CVR Partners is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lavoro Limited and CVR Partners

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

The idea behind Lavoro Limited Warrant and CVR Partners LP 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.