Correlation Between Arca Continental and Alfa SAB
Can any of the company-specific risk be diversified away by investing in both Arca Continental and Alfa SAB 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 Arca Continental and Alfa SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arca Continental SAB and Alfa SAB de, you can compare the effects of market volatilities on Arca Continental and Alfa SAB 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 Arca Continental with a short position of Alfa SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arca Continental and Alfa SAB.
Diversification Opportunities for Arca Continental and Alfa SAB
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arca and Alfa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Arca Continental SAB and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and Arca Continental 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 Arca Continental SAB are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of Arca Continental i.e., Arca Continental and Alfa SAB go up and down completely randomly.
Pair Corralation between Arca Continental and Alfa SAB
Assuming the 90 days horizon Arca Continental is expected to generate 10.53 times less return on investment than Alfa SAB. But when comparing it to its historical volatility, Arca Continental SAB is 1.42 times less risky than Alfa SAB. It trades about 0.01 of its potential returns per unit of risk. Alfa SAB de is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Alfa SAB de on August 31, 2024 and sell it today you would earn a total of 475.00 from holding Alfa SAB de or generate 44.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arca Continental SAB vs. Alfa SAB de
Performance |
| Timeline |
| Arca Continental SAB |
| Alfa SAB de |
Arca Continental and Alfa SAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arca Continental and Alfa SAB
The main advantage of trading using opposite Arca Continental and Alfa SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arca Continental position performs unexpectedly, Alfa SAB 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 Alfa SAB will offset losses from the drop in Alfa SAB's long position.| Arca Continental vs. Gruma SAB de | Arca Continental vs. Alfa SAB de | Arca Continental vs. Fomento Econmico Mexicano | Arca Continental vs. Grupo Aeroportuario del |
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 CEOs Directory module to screen CEOs from public companies around the world.
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