Correlation Between Loft II and Pedra Dourada

Can any of the company-specific risk be diversified away by investing in both Loft II and Pedra Dourada 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 Pedra Dourada 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 Pedra Dourada Fundo, you can compare the effects of market volatilities on Loft II and Pedra Dourada 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 Pedra Dourada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and Pedra Dourada.

Diversification Opportunities for Loft II and Pedra Dourada

0.46

Correlation Coefficient

Loft II  Pedra Dourada

Very weak diversification

The 3 months correlation between Loft and Pedra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and Pedra Dourada Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pedra Dourada Fundo 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 Pedra Dourada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pedra Dourada Fundo has no effect on the direction of Loft II i.e., Loft II and Pedra Dourada go up and down completely randomly.

Pair Corralation between Loft II and Pedra Dourada

Assuming the 90 days trading horizon Loft II Fundo is expected to generate 9.17 times more return on investment than Pedra Dourada. However, Loft II is 9.17 times more volatile than Pedra Dourada Fundo. It trades about 0.12 of its potential returns per unit of risk. Pedra Dourada Fundo is currently generating about 0.09 per unit of risk. If you would invest  390.00  in Loft II Fundo on April 24, 2025 and sell it today you would earn a total of  202.00  from holding Loft II Fundo or generate 51.79% return on investment over 90 days.

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

Loft II Fundo  vs.  Pedra Dourada Fundo

Loft II Fundo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loft II Fundo are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Loft II sustained solid returns over the last few months and may actually be approaching a breakup point.

Pedra Dourada Fundo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pedra Dourada Fundo are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak essential indicators, Pedra Dourada may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Loft II and Pedra Dourada

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

The idea behind Loft II Fundo and Pedra Dourada 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.