Correlation Between Tecnisa SA and LPS Brasil

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

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

Diversification Opportunities for Tecnisa SA and LPS Brasil

-0.31

Correlation Coefficient

Tecnisa SA  LPS Brasil

Very good diversification

The 3 months correlation between Tecnisa and LPS is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tecnisa SA and LPS Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPS Brasil and Tecnisa SA 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 Tecnisa SA are associated (or correlated) with LPS Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPS Brasil has no effect on the direction of Tecnisa SA i.e., Tecnisa SA and LPS Brasil go up and down completely randomly.

Pair Corralation between Tecnisa SA and LPS Brasil

Assuming the 90 days trading horizon Tecnisa SA is expected to generate 0.9 times more return on investment than LPS Brasil. However, Tecnisa SA is 1.12 times less risky than LPS Brasil. It trades about 0.11 of its potential returns per unit of risk. LPS Brasil is currently generating about 0.0 per unit of risk. If you would invest  125.00  in Tecnisa SA on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Tecnisa SA or generate 16.8% return on investment over 90 days.

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

Tecnisa SA  vs.  LPS Brasil

Tecnisa SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnisa SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Tecnisa SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

LPS Brasil

Risk-Adjusted Performance

Very Weak

Over the last 90 days LPS Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, LPS Brasil 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 Tecnisa SA and LPS Brasil

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

The idea behind Tecnisa SA and LPS Brasil 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.