Correlation Between Localiza Rent and Natura Co

Specify exactly 2 symbols:
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

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Localiza and Natura is 0.01. 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. But the stock apears to be less risky and, when comparing its historical volatility, Localiza Rent a is 1.24 times less risky than Natura Co. The stock trades about -0.01 of its potential returns per unit of risk. The Natura Co Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  951.00  in Natura Co Holding on September 6, 2024 and sell it today you would earn a total of  480.00  from holding Natura Co Holding or generate 50.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.0%
ValuesDaily Returns

Localiza Rent a  vs.  Natura Co Holding

 Performance 
       Timeline  
Localiza Rent a 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Localiza Rent a 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.
Natura Co Holding 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Natura Co Holding are ranked lower than 3 (%) 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 January 2025.

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.
The idea behind Localiza Rent a and Natura Co Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

Other Complementary Tools

AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Portfolio Analyzer
Portfolio analysis module that provides access to portfolio diagnostics and optimization engine