Correlation Between Loft II and FUNDO DE

Can any of the company-specific risk be diversified away by investing in both Loft II and FUNDO DE 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 Loft II and FUNDO DE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Loft II Fundo and FUNDO DE INVESTIMENTO, you can compare the effects of market volatilities on Loft II and FUNDO DE 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 Loft II with a short position of FUNDO DE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and FUNDO DE.

Diversification Opportunities for Loft II and FUNDO DE

-0.29

Correlation Coefficient

Loft II  FUNDO DE

Very good diversification

The 3 months correlation between Loft and FUNDO is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and FUNDO DE INVESTIMENTO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUNDO DE INVESTIMENTO and Loft II 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 Loft II Fundo are associated (or correlated) with FUNDO DE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUNDO DE INVESTIMENTO has no effect on the direction of Loft II i.e., Loft II and FUNDO DE go up and down completely randomly.

Pair Corralation between Loft II and FUNDO DE

Assuming the 90 days trading horizon Loft II Fundo is expected to under-perform the FUNDO DE. In addition to that, Loft II is 7.34 times more volatile than FUNDO DE INVESTIMENTO. It trades about -0.02 of its total potential returns per unit of risk. FUNDO DE INVESTIMENTO is currently generating about 0.04 per unit of volatility. If you would invest  950.00  in FUNDO DE INVESTIMENTO on February 16, 2024 and sell it today you would earn a total of  14.00  from holding FUNDO DE INVESTIMENTO or generate 1.47% return on investment over 90 days.

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

Loft II Fundo  vs.  FUNDO DE INVESTIMENTO

Loft II Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

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

FUNDO DE INVESTIMENTO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FUNDO DE INVESTIMENTO are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, FUNDO DE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Loft II and FUNDO DE

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

The idea behind Loft II Fundo and FUNDO DE INVESTIMENTO 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.