Correlation Between Cementos Pacasmayo and Fletcher Building

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

Diversification Opportunities for Cementos Pacasmayo and Fletcher Building

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Cementos and Fletcher is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and Fletcher Building Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fletcher Building and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with Fletcher Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fletcher Building has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and Fletcher Building go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Fletcher Building

Given the investment horizon of 90 days Cementos Pacasmayo SAA is expected to generate 0.79 times more return on investment than Fletcher Building. However, Cementos Pacasmayo SAA is 1.27 times less risky than Fletcher Building. It trades about -0.09 of its potential returns per unit of risk. Fletcher Building Ltd is currently generating about -0.17 per unit of risk. If you would invest  634.00  in Cementos Pacasmayo SAA on September 12, 2024 and sell it today you would lose (36.00) from holding Cementos Pacasmayo SAA or give up 5.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cementos Pacasmayo SAA  vs.  Fletcher Building Ltd

 Performance 
       Timeline  
Cementos Pacasmayo SAA 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Fletcher Building 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fletcher Building Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cementos Pacasmayo and Fletcher Building Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cementos Pacasmayo and Fletcher Building

The main advantage of trading using opposite Cementos Pacasmayo and Fletcher Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cementos Pacasmayo position performs unexpectedly, Fletcher Building 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 Fletcher Building will offset losses from the drop in Fletcher Building's long position.
The idea behind Cementos Pacasmayo SAA and Fletcher Building Ltd 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 Stocks Directory module to find actively traded stocks across global markets.

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