Correlation Between Agrometal SAI and BBVA Banco

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Can any of the company-specific risk be diversified away by investing in both Agrometal SAI and BBVA Banco 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 Agrometal SAI and BBVA Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agrometal SAI and BBVA Banco Frances, you can compare the effects of market volatilities on Agrometal SAI and BBVA Banco 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 Agrometal SAI with a short position of BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agrometal SAI and BBVA Banco.

Diversification Opportunities for Agrometal SAI and BBVA Banco

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Agrometal and BBVA is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Agrometal SAI and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Agrometal SAI 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 Agrometal SAI are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Agrometal SAI i.e., Agrometal SAI and BBVA Banco go up and down completely randomly.

Pair Corralation between Agrometal SAI and BBVA Banco

Assuming the 90 days trading horizon Agrometal SAI is expected to generate 1.29 times more return on investment than BBVA Banco. However, Agrometal SAI is 1.29 times more volatile than BBVA Banco Frances. It trades about 0.51 of its potential returns per unit of risk. BBVA Banco Frances is currently generating about 0.26 per unit of risk. If you would invest  5,170  in Agrometal SAI on August 28, 2024 and sell it today you would earn a total of  2,250  from holding Agrometal SAI or generate 43.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Agrometal SAI  vs.  BBVA Banco Frances

 Performance 
       Timeline  
Agrometal SAI 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agrometal SAI sustained solid returns over the last few months and may actually be approaching a breakup point.
BBVA Banco Frances 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BBVA Banco sustained solid returns over the last few months and may actually be approaching a breakup point.

Agrometal SAI and BBVA Banco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Agrometal SAI and BBVA Banco

The main advantage of trading using opposite Agrometal SAI and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agrometal SAI position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.
The idea behind Agrometal SAI and BBVA Banco Frances 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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