Correlation Between Romcab SA and LACTATE NATURA

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

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

Diversification Opportunities for Romcab SA and LACTATE NATURA

0.0

Correlation Coefficient

Romcab SA  LACTATE NATURA

Pay attention - limited upside

The 3 months correlation between Romcab and LACTATE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Romcab SA and LACTATE NATURA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LACTATE NATURA SA and Romcab SA 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 Romcab SA are associated (or correlated) with LACTATE NATURA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LACTATE NATURA SA has no effect on the direction of Romcab SA i.e., Romcab SA and LACTATE NATURA go up and down completely randomly.

Pair Corralation between Romcab SA and LACTATE NATURA

If you would invest  2.08  in Romcab SA on December 21, 2024 and sell it today you would earn a total of  1.64  from holding Romcab SA or generate 78.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Romcab SA  vs.  LACTATE NATURA SA

Romcab SA

Risk-Adjusted Performance

Good

Over the last 90 days Romcab SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Romcab SA displayed solid returns over the last few months and may actually be approaching a breakup point.

LACTATE NATURA SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Romcab SA and LACTATE NATURA

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

The idea behind Romcab SA and LACTATE NATURA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.