Correlation Between Natura Co and Locaweb Servios

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

By analyzing existing cross correlation between Natura Co Holding and Locaweb Servios de, you can compare the effects of market volatilities on Natura Co and Locaweb Servios 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 Natura Co with a short position of Locaweb Servios. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura Co and Locaweb Servios.

Diversification Opportunities for Natura Co and Locaweb Servios

-0.2

Correlation Coefficient

Natura Co  Locaweb Servios

Good diversification

The 3 months correlation between Natura and Locaweb is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Locaweb Servios de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locaweb Servios de and Natura Co 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 Natura Co Holding are associated (or correlated) with Locaweb Servios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locaweb Servios de has no effect on the direction of Natura Co i.e., Natura Co and Locaweb Servios go up and down completely randomly.

Pair Corralation between Natura Co and Locaweb Servios

Assuming the 90 days trading horizon Natura Co Holding is expected to generate 0.82 times more return on investment than Locaweb Servios. However, Natura Co Holding is 1.21 times less risky than Locaweb Servios. It trades about 0.07 of its potential returns per unit of risk. Locaweb Servios de is currently generating about -0.04 per unit of risk. If you would invest  1,355  in Natura Co Holding on August 30, 2024 and sell it today you would earn a total of  125.00  from holding Natura Co Holding or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Natura Co Holding  vs.  Locaweb Servios de

Natura Co Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Natura Co Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Natura Co may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Locaweb Servios de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Locaweb Servios de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Natura Co and Locaweb Servios

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

The idea behind Natura Co Holding and Locaweb Servios de 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.