Correlation Between Power Assets and Pampa Energia
Can any of the company-specific risk be diversified away by investing in both Power Assets and Pampa Energia 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 Power Assets and Pampa Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Assets Holdings and Pampa Energia SA, you can compare the effects of market volatilities on Power Assets and Pampa Energia 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 Power Assets with a short position of Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Assets and Pampa Energia.
Diversification Opportunities for Power Assets and Pampa Energia
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Power and Pampa is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Power Assets 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 Power Assets Holdings are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Power Assets i.e., Power Assets and Pampa Energia go up and down completely randomly.
Pair Corralation between Power Assets and Pampa Energia
Assuming the 90 days horizon Power Assets is expected to generate 1.94 times less return on investment than Pampa Energia. In addition to that, Power Assets is 1.03 times more volatile than Pampa Energia SA. It trades about 0.05 of its total potential returns per unit of risk. Pampa Energia SA is currently generating about 0.09 per unit of volatility. If you would invest 3,914 in Pampa Energia SA on September 1, 2024 and sell it today you would earn a total of 4,645 from holding Pampa Energia SA or generate 118.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 70.7% |
| Values | Daily Returns |
Power Assets Holdings vs. Pampa Energia SA
Performance |
| Timeline |
| Power Assets Holdings |
| Pampa Energia SA |
Power Assets and Pampa Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Assets and Pampa Energia
The main advantage of trading using opposite Power Assets and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.The idea behind Power Assets Holdings and Pampa Energia SA 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.| Pampa Energia vs. Grupo Financiero Galicia | Pampa Energia vs. Banco Macro SA | Pampa Energia vs. Empresa Distribuidora y | Pampa Energia vs. Transportadora de Gas |
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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