Correlation Between Playstudios and Lavoro Limited

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

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

Diversification Opportunities for Playstudios and Lavoro Limited

0.37

Correlation Coefficient

Playstudios  Lavoro Limited

Weak diversification

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

Pair Corralation between Playstudios and Lavoro Limited

Given the investment horizon of 90 days Playstudios is expected to under-perform the Lavoro Limited. But the stock apears to be less risky and, when comparing its historical volatility, Playstudios is 1.5 times less risky than Lavoro Limited. The stock trades about -0.17 of its potential returns per unit of risk. The Lavoro Limited Class is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Lavoro Limited Class on December 21, 2024 and sell it today you would lose (162.00) from holding Lavoro Limited Class or give up 31.52% of portfolio value over 90 days.

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

Playstudios  vs.  Lavoro Limited Class

Playstudios

Risk-Adjusted Performance

Very Weak

Over the last 90 days Playstudios has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lavoro Limited Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lavoro Limited Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Playstudios and Lavoro Limited

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

The idea behind Playstudios and Lavoro Limited Class 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.