Correlation Between Cresud SA and Distribuidora
Can any of the company-specific risk be diversified away by investing in both Cresud SA and Distribuidora 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 Cresud SA and Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cresud SA and Distribuidora de Gas, you can compare the effects of market volatilities on Cresud SA and Distribuidora 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 Cresud SA with a short position of Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cresud SA and Distribuidora.
Diversification Opportunities for Cresud SA and Distribuidora
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cresud and Distribuidora is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cresud SA and Distribuidora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribuidora de Gas and Cresud SA 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 Cresud SA are associated (or correlated) with Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribuidora de Gas has no effect on the direction of Cresud SA i.e., Cresud SA and Distribuidora go up and down completely randomly.
Pair Corralation between Cresud SA and Distribuidora
Assuming the 90 days trading horizon Cresud SA is expected to generate 2.13 times less return on investment than Distribuidora. But when comparing it to its historical volatility, Cresud SA is 1.32 times less risky than Distribuidora. It trades about 0.08 of its potential returns per unit of risk. Distribuidora de Gas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 117,550 in Distribuidora de Gas on September 2, 2024 and sell it today you would earn a total of 75,950 from holding Distribuidora de Gas or generate 64.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cresud SA vs. Distribuidora de Gas
Performance |
| Timeline |
| Cresud SA |
| Distribuidora de Gas |
Cresud SA and Distribuidora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cresud SA and Distribuidora
The main advantage of trading using opposite Cresud SA and Distribuidora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cresud SA position performs unexpectedly, Distribuidora 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 Distribuidora will offset losses from the drop in Distribuidora's long position.The idea behind Cresud SA and Distribuidora de Gas 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.| Distribuidora vs. Compania de Transporte | Distribuidora vs. Agrometal SAI | Distribuidora vs. Telecom Argentina | Distribuidora vs. United States Steel |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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