Correlation Between Recrusul and LESTE FDO

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

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

Diversification Opportunities for Recrusul and LESTE FDO

-0.67

Correlation Coefficient

Recrusul  LESTE FDO

Excellent diversification

The 3 months correlation between Recrusul and LESTE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Recrusul SA and LESTE FDO INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LESTE FDO INV and Recrusul 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 Recrusul SA are associated (or correlated) with LESTE FDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LESTE FDO INV has no effect on the direction of Recrusul i.e., Recrusul and LESTE FDO go up and down completely randomly.

Pair Corralation between Recrusul and LESTE FDO

Assuming the 90 days trading horizon Recrusul SA is expected to generate 5.48 times more return on investment than LESTE FDO. However, Recrusul is 5.48 times more volatile than LESTE FDO INV. It trades about 0.09 of its potential returns per unit of risk. LESTE FDO INV is currently generating about -0.18 per unit of risk. If you would invest  102.00  in Recrusul SA on September 14, 2024 and sell it today you would earn a total of  30.00  from holding Recrusul SA or generate 29.41% return on investment over 90 days.

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

Recrusul SA  vs.  LESTE FDO INV

Recrusul SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

LESTE FDO INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LESTE FDO INV has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Recrusul and LESTE FDO

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

The idea behind Recrusul SA and LESTE FDO INV 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.