Correlation Between Localiza Rent and CVC Brasil

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

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

Diversification Opportunities for Localiza Rent and CVC Brasil

0.84

Correlation Coefficient

Localiza Rent  CVC Brasil

Very poor diversification

The 3 months correlation between Localiza and CVC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Localiza Rent a and CVC Brasil Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Brasil Operadora and Localiza Rent 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 Localiza Rent a are associated (or correlated) with CVC Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Brasil Operadora has no effect on the direction of Localiza Rent i.e., Localiza Rent and CVC Brasil go up and down completely randomly.

Pair Corralation between Localiza Rent and CVC Brasil

Assuming the 90 days trading horizon Localiza Rent a is expected to generate 0.65 times more return on investment than CVC Brasil. However, Localiza Rent a is 1.53 times less risky than CVC Brasil. It trades about 0.16 of its potential returns per unit of risk. CVC Brasil Operadora is currently generating about 0.05 per unit of risk. If you would invest  3,202  in Localiza Rent a on February 15, 2025 and sell it today you would earn a total of  873.00  from holding Localiza Rent a or generate 27.26% return on investment over 90 days.

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

Localiza Rent a  vs.  CVC Brasil Operadora

Localiza Rent a

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Localiza Rent a are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Localiza Rent unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVC Brasil Operadora

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Brasil Operadora are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVC Brasil may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Localiza Rent and CVC Brasil

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

The idea behind Localiza Rent a and CVC Brasil Operadora 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.