Correlation Between Localiza Rent and Positivo Tecnologia

Can any of the company-specific risk be diversified away by investing in both Localiza Rent and Positivo Tecnologia 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 Positivo Tecnologia 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 Positivo Tecnologia SA, you can compare the effects of market volatilities on Localiza Rent and Positivo Tecnologia 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 Positivo Tecnologia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Localiza Rent and Positivo Tecnologia.

Diversification Opportunities for Localiza Rent and Positivo Tecnologia

0.21

Correlation Coefficient

Localiza Rent  Positivo Tecnologia

Modest diversification

The 3 months correlation between Localiza and Positivo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Localiza Rent a and Positivo Tecnologia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Positivo Tecnologia 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 Positivo Tecnologia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Positivo Tecnologia has no effect on the direction of Localiza Rent i.e., Localiza Rent and Positivo Tecnologia go up and down completely randomly.

Pair Corralation between Localiza Rent and Positivo Tecnologia

Assuming the 90 days trading horizon Localiza Rent a is expected to generate 1.07 times more return on investment than Positivo Tecnologia. However, Localiza Rent is 1.07 times more volatile than Positivo Tecnologia SA. It trades about 0.06 of its potential returns per unit of risk. Positivo Tecnologia SA is currently generating about 0.02 per unit of risk. If you would invest  3,176  in Localiza Rent a on December 30, 2024 and sell it today you would earn a total of  272.00  from holding Localiza Rent a or generate 8.56% return on investment over 90 days.

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

Localiza Rent a  vs.  Positivo Tecnologia SA

Localiza Rent a

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Localiza Rent a are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Localiza Rent may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Positivo Tecnologia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Positivo Tecnologia SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Positivo Tecnologia 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 Localiza Rent and Positivo Tecnologia

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

The idea behind Localiza Rent a and Positivo Tecnologia 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.