Correlation Between LIFE CAPITAL and Loft II

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

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

Diversification Opportunities for LIFE CAPITAL and Loft II

-0.3

Correlation Coefficient

LIFE CAPITAL  Loft II

Very good diversification

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

Pair Corralation between LIFE CAPITAL and Loft II

Assuming the 90 days trading horizon LIFE CAPITAL PARTNERS is expected to generate 0.12 times more return on investment than Loft II. However, LIFE CAPITAL PARTNERS is 8.24 times less risky than Loft II. It trades about 0.02 of its potential returns per unit of risk. Loft II Fundo is currently generating about -0.04 per unit of risk. If you would invest  990.00  in LIFE CAPITAL PARTNERS on March 14, 2024 and sell it today you would earn a total of  9.00  from holding LIFE CAPITAL PARTNERS or generate 0.91% return on investment over 90 days.

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

LIFE CAPITAL PARTNERS  vs.  Loft II Fundo

LIFE CAPITAL PARTNERS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LIFE CAPITAL PARTNERS are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, LIFE CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with LIFE CAPITAL and Loft II

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

The idea behind LIFE CAPITAL PARTNERS and Loft II Fundo 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.