Correlation Between Central Puerto and Naturgy BAN
Can any of the company-specific risk be diversified away by investing in both Central Puerto and Naturgy BAN 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 Central Puerto and Naturgy BAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Puerto SA and Naturgy BAN SA, you can compare the effects of market volatilities on Central Puerto and Naturgy BAN 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 Central Puerto with a short position of Naturgy BAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Puerto and Naturgy BAN.
Diversification Opportunities for Central Puerto and Naturgy BAN
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Central and Naturgy is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Naturgy BAN SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy BAN SA and Central Puerto 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 Central Puerto SA are associated (or correlated) with Naturgy BAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy BAN SA has no effect on the direction of Central Puerto i.e., Central Puerto and Naturgy BAN go up and down completely randomly.
Pair Corralation between Central Puerto and Naturgy BAN
Assuming the 90 days trading horizon Central Puerto SA is expected to under-perform the Naturgy BAN. But the stock apears to be less risky and, when comparing its historical volatility, Central Puerto SA is 1.45 times less risky than Naturgy BAN. The stock trades about -0.03 of its potential returns per unit of risk. The Naturgy BAN SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 231,000 in Naturgy BAN SA on October 20, 2024 and sell it today you would earn a total of 20,500 from holding Naturgy BAN SA or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Puerto SA vs. Naturgy BAN SA
Performance |
| Timeline |
| Central Puerto SA |
| Naturgy BAN SA |
Central Puerto and Naturgy BAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Puerto and Naturgy BAN
The main advantage of trading using opposite Central Puerto and Naturgy BAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto position performs unexpectedly, Naturgy BAN 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 Naturgy BAN will offset losses from the drop in Naturgy BAN's long position.| Central Puerto vs. Enel Generacion Costanera | Central Puerto vs. Edesa Holding SA | Central Puerto vs. Empresa Distribuidora Electrica |
| Naturgy BAN vs. Transportadora de Gas | Naturgy BAN vs. Distribuidora de Gas | Naturgy BAN vs. Walmart | Naturgy BAN vs. Central Puerto SA |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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