Correlation Between Compania and Intel
Can any of the company-specific risk be diversified away by investing in both Compania and Intel 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 Compania and Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Minas and Intel, you can compare the effects of market volatilities on Compania and Intel 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 Compania with a short position of Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Intel.
Diversification Opportunities for Compania and Intel
Good diversification
The 3 months correlation between Compania and Intel is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and Compania 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 Compania de Minas are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Compania i.e., Compania and Intel go up and down completely randomly.
Pair Corralation between Compania and Intel
Assuming the 90 days trading horizon Compania de Minas is expected to under-perform the Intel. But the stock apears to be less risky and, when comparing its historical volatility, Compania de Minas is 3.54 times less risky than Intel. The stock trades about -0.27 of its potential returns per unit of risk. The Intel is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,980 in Intel on October 22, 2024 and sell it today you would earn a total of 151.00 from holding Intel or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 78.95% |
| Values | Daily Returns |
Compania de Minas vs. Intel
Performance |
| Timeline |
| Compania de Minas |
| Intel |
Compania and Intel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Intel
The main advantage of trading using opposite Compania and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.The idea behind Compania de Minas and Intel 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.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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