Correlation Between Fator IFIX and Lupatech

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

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

Diversification Opportunities for Fator IFIX and Lupatech

-0.11

Correlation Coefficient

Fator IFIX  Lupatech

Good diversification

The 3 months correlation between Fator and Lupatech is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fator IFIX Fundo and Lupatech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lupatech SA and Fator IFIX 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 Fator IFIX Fundo are associated (or correlated) with Lupatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lupatech SA has no effect on the direction of Fator IFIX i.e., Fator IFIX and Lupatech go up and down completely randomly.

Pair Corralation between Fator IFIX and Lupatech

Assuming the 90 days trading horizon Fator IFIX Fundo is expected to generate 0.89 times more return on investment than Lupatech. However, Fator IFIX Fundo is 1.12 times less risky than Lupatech. It trades about -0.03 of its potential returns per unit of risk. Lupatech SA is currently generating about -0.03 per unit of risk. If you would invest  4,954  in Fator IFIX Fundo on December 2, 2024 and sell it today you would lose (255.00) from holding Fator IFIX Fundo or give up 5.15% of portfolio value over 90 days.

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

Fator IFIX Fundo  vs.  Lupatech SA

Fator IFIX Fundo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fator IFIX Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Fator IFIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lupatech SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lupatech is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fator IFIX and Lupatech

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

The idea behind Fator IFIX Fundo and Lupatech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.