Correlation Between Energia Latina and Paz Corp
Can any of the company-specific risk be diversified away by investing in both Energia Latina and Paz Corp 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 Energia Latina and Paz Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energia Latina SA and Paz Corp, you can compare the effects of market volatilities on Energia Latina and Paz Corp 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 Energia Latina with a short position of Paz Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energia Latina and Paz Corp.
Diversification Opportunities for Energia Latina and Paz Corp
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Energia and Paz is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Energia Latina SA and Paz Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Corp and Energia Latina 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 Energia Latina SA are associated (or correlated) with Paz Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Corp has no effect on the direction of Energia Latina i.e., Energia Latina and Paz Corp go up and down completely randomly.
Pair Corralation between Energia Latina and Paz Corp
Assuming the 90 days trading horizon Energia Latina SA is expected to generate 0.5 times more return on investment than Paz Corp. However, Energia Latina SA is 2.01 times less risky than Paz Corp. It trades about 0.13 of its potential returns per unit of risk. Paz Corp is currently generating about -0.13 per unit of risk. If you would invest 90,000 in Energia Latina SA on September 12, 2024 and sell it today you would earn a total of 3,500 from holding Energia Latina SA or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 53.33% |
| Values | Daily Returns |
Energia Latina SA vs. Paz Corp
Performance |
| Timeline |
| Energia Latina SA |
| Paz Corp |
Energia Latina and Paz Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energia Latina and Paz Corp
The main advantage of trading using opposite Energia Latina and Paz Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energia Latina position performs unexpectedly, Paz Corp 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 Paz Corp will offset losses from the drop in Paz Corp's long position.| Energia Latina vs. Banco de Credito | Energia Latina vs. Multiexport Foods SA | Energia Latina vs. LATAM Airlines Group |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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