Correlation Between Gen Digital and Locaweb Servios

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

By analyzing existing cross correlation between Gen Digital and Locaweb Servios de, you can compare the effects of market volatilities on Gen Digital and Locaweb Servios 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 Gen Digital with a short position of Locaweb Servios. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gen Digital and Locaweb Servios.

Diversification Opportunities for Gen Digital and Locaweb Servios

-0.56

Correlation Coefficient

Gen Digital  Locaweb Servios

Excellent diversification

The 3 months correlation between Gen and Locaweb is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Locaweb Servios de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locaweb Servios de and Gen Digital 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 Gen Digital are associated (or correlated) with Locaweb Servios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locaweb Servios de has no effect on the direction of Gen Digital i.e., Gen Digital and Locaweb Servios go up and down completely randomly.

Pair Corralation between Gen Digital and Locaweb Servios

Assuming the 90 days trading horizon Gen Digital is expected to generate 0.61 times more return on investment than Locaweb Servios. However, Gen Digital is 1.64 times less risky than Locaweb Servios. It trades about 0.08 of its potential returns per unit of risk. Locaweb Servios de is currently generating about -0.02 per unit of risk. If you would invest  9,578  in Gen Digital on October 5, 2024 and sell it today you would earn a total of  8,315  from holding Gen Digital or generate 86.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.9%
Values	Daily Returns

Gen Digital  vs.  Locaweb Servios de

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Locaweb Servios de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Locaweb Servios de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gen Digital and Locaweb Servios

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

The idea behind Gen Digital and Locaweb Servios de 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.