Correlation Between Fundo Investimento and Faria Lima

Can any of the company-specific risk be diversified away by investing in both Fundo Investimento and Faria Lima 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 Fundo Investimento and Faria Lima into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundo Investimento Imobiliario and Faria Lima Capital, you can compare the effects of market volatilities on Fundo Investimento and Faria Lima 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 Fundo Investimento with a short position of Faria Lima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo Investimento and Faria Lima.

Diversification Opportunities for Fundo Investimento and Faria Lima

0.3

Correlation Coefficient

Fundo Investimento  Faria Lima

Weak diversification

The 3 months correlation between Fundo and Faria is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investimento Imobiliario and Faria Lima Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faria Lima Capital and Fundo Investimento 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 Fundo Investimento Imobiliario are associated (or correlated) with Faria Lima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faria Lima Capital has no effect on the direction of Fundo Investimento i.e., Fundo Investimento and Faria Lima go up and down completely randomly.

Pair Corralation between Fundo Investimento and Faria Lima

Assuming the 90 days trading horizon Fundo Investimento Imobiliario is expected to under-perform the Faria Lima. In addition to that, Fundo Investimento is 3.2 times more volatile than Faria Lima Capital. It trades about -0.12 of its total potential returns per unit of risk. Faria Lima Capital is currently generating about -0.02 per unit of volatility. If you would invest  9,749  in Faria Lima Capital on September 15, 2024 and sell it today you would lose (64.00) from holding Faria Lima Capital or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Fundo Investimento Imobiliario  vs.  Faria Lima Capital

Fundo Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investimento Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Faria Lima Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faria Lima Capital has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, Faria Lima is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fundo Investimento and Faria Lima

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

The idea behind Fundo Investimento Imobiliario and Faria Lima Capital 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.