Correlation Between BBVA Banco and Central Puerto
Can any of the company-specific risk be diversified away by investing in both BBVA Banco and Central Puerto 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 BBVA Banco and Central Puerto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and Central Puerto SA, you can compare the effects of market volatilities on BBVA Banco and Central Puerto 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 BBVA Banco with a short position of Central Puerto. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Central Puerto.
Diversification Opportunities for BBVA Banco and Central Puerto
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BBVA and Central is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Central Puerto SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Puerto SA and BBVA Banco 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 BBVA Banco Frances are associated (or correlated) with Central Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Puerto SA has no effect on the direction of BBVA Banco i.e., BBVA Banco and Central Puerto go up and down completely randomly.
Pair Corralation between BBVA Banco and Central Puerto
Assuming the 90 days trading horizon BBVA Banco Frances is expected to generate 8.8 times more return on investment than Central Puerto. However, BBVA Banco is 8.8 times more volatile than Central Puerto SA. It trades about 0.08 of its potential returns per unit of risk. Central Puerto SA is currently generating about 0.13 per unit of risk. If you would invest 14,205 in BBVA Banco Frances on August 30, 2024 and sell it today you would earn a total of 588,795 from holding BBVA Banco Frances or generate 4144.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. Central Puerto SA
Performance |
| Timeline |
| BBVA Banco Frances |
| Central Puerto SA |
BBVA Banco and Central Puerto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and Central Puerto
The main advantage of trading using opposite BBVA Banco and Central Puerto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, Central Puerto 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 Central Puerto will offset losses from the drop in Central Puerto's long position.| BBVA Banco vs. Agrometal SAI | BBVA Banco vs. Compania de Transporte | BBVA Banco vs. Harmony Gold Mining | BBVA Banco vs. Transportadora de Gas |
| Central Puerto vs. Compania de Transporte | Central Puerto vs. Transportadora de Gas | Central Puerto vs. Harmony Gold Mining | Central Puerto vs. Agrometal SAI |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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