Correlation Between Localiza Rent and Natura Co
Can any of the company-specific risk be diversified away by investing in both Localiza Rent and Natura Co 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 Localiza Rent and Natura Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Localiza Rent a and Natura Co Holding, you can compare the effects of market volatilities on Localiza Rent and Natura Co 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 Localiza Rent with a short position of Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Localiza Rent and Natura Co.
Diversification Opportunities for Localiza Rent and Natura Co
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Localiza and Natura is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Localiza Rent a and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding and Localiza Rent 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 Localiza Rent a are associated (or correlated) with Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Localiza Rent i.e., Localiza Rent and Natura Co go up and down completely randomly.
Pair Corralation between Localiza Rent and Natura Co
Assuming the 90 days trading horizon Localiza Rent a is expected to under-perform the Natura Co. In addition to that, Localiza Rent is 1.1 times more volatile than Natura Co Holding. It trades about -0.23 of its total potential returns per unit of risk. Natura Co Holding is currently generating about -0.02 per unit of volatility. If you would invest 1,461 in Natura Co Holding on September 5, 2024 and sell it today you would lose (30.00) from holding Natura Co Holding or give up 2.05% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Localiza Rent a vs. Natura Co Holding
Performance |
Timeline |
Localiza Rent a |
Natura Co Holding |
Localiza Rent and Natura Co Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Localiza Rent and Natura Co
The main advantage of trading using opposite Localiza Rent and Natura Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Localiza Rent position performs unexpectedly, Natura Co 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 Natura Co will offset losses from the drop in Natura Co's long position.Localiza Rent vs. Oi SA | Localiza Rent vs. Metalurgica Gerdau SA | Localiza Rent vs. Metalurgica Gerdau SA | Localiza Rent vs. Oi SA |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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