Correlation Between Distribuidora and Compania
Can any of the company-specific risk be diversified away by investing in both Distribuidora and Compania 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 Distribuidora and Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Distribuidora de Gas and Compania de Transporte, you can compare the effects of market volatilities on Distribuidora and Compania 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 Distribuidora with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distribuidora and Compania.
Diversification Opportunities for Distribuidora and Compania
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Distribuidora and Compania is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Distribuidora de Gas and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and Distribuidora 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 Distribuidora de Gas are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Distribuidora i.e., Distribuidora and Compania go up and down completely randomly.
Pair Corralation between Distribuidora and Compania
Assuming the 90 days trading horizon Distribuidora de Gas is expected to generate 0.88 times more return on investment than Compania. However, Distribuidora de Gas is 1.14 times less risky than Compania. It trades about 0.47 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.24 per unit of risk. If you would invest 141,000 in Distribuidora de Gas on August 29, 2024 and sell it today you would earn a total of 49,000 from holding Distribuidora de Gas or generate 34.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Distribuidora de Gas vs. Compania de Transporte
Performance |
| Timeline |
| Distribuidora de Gas |
| Compania de Transporte |
Distribuidora and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Distribuidora and Compania
The main advantage of trading using opposite Distribuidora and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distribuidora position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.| Distribuidora vs. Harmony Gold Mining | Distribuidora vs. Compania de Transporte | Distribuidora vs. Agrometal SAI |
| Compania vs. Pampa Energia SA | Compania vs. Vista Energy, SAB | Compania vs. United States Steel | Compania 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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