Correlation Between CAT Strategic and Pampa Metals
Can any of the company-specific risk be diversified away by investing in both CAT Strategic and Pampa Metals 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 CAT Strategic and Pampa Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAT Strategic Metals and Pampa Metals, you can compare the effects of market volatilities on CAT Strategic and Pampa Metals 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 CAT Strategic with a short position of Pampa Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAT Strategic and Pampa Metals.
Diversification Opportunities for CAT Strategic and Pampa Metals
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CAT and Pampa is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CAT Strategic Metals and Pampa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Metals and CAT Strategic 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 CAT Strategic Metals are associated (or correlated) with Pampa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Metals has no effect on the direction of CAT Strategic i.e., CAT Strategic and Pampa Metals go up and down completely randomly.
Pair Corralation between CAT Strategic and Pampa Metals
Assuming the 90 days horizon CAT Strategic Metals is expected to generate 9.55 times more return on investment than Pampa Metals. However, CAT Strategic is 9.55 times more volatile than Pampa Metals. It trades about 0.23 of its potential returns per unit of risk. Pampa Metals is currently generating about 0.02 per unit of risk. If you would invest 0.14 in CAT Strategic Metals on August 29, 2024 and sell it today you would earn a total of 0.26 from holding CAT Strategic Metals or generate 185.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAT Strategic Metals vs. Pampa Metals
Performance |
| Timeline |
| CAT Strategic Metals |
| Pampa Metals |
CAT Strategic and Pampa Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAT Strategic and Pampa Metals
The main advantage of trading using opposite CAT Strategic and Pampa Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAT Strategic position performs unexpectedly, Pampa Metals 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 Pampa Metals will offset losses from the drop in Pampa Metals' long position.The idea behind CAT Strategic Metals and Pampa Metals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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