Correlation Between Loma Negra and Cementos Pacasmayo
Can any of the company-specific risk be diversified away by investing in both Loma Negra and Cementos Pacasmayo 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 Loma Negra and Cementos Pacasmayo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loma Negra Compania and Cementos Pacasmayo SAA, you can compare the effects of market volatilities on Loma Negra and Cementos Pacasmayo 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 Loma Negra with a short position of Cementos Pacasmayo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loma Negra and Cementos Pacasmayo.
Diversification Opportunities for Loma Negra and Cementos Pacasmayo
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Loma and Cementos is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Loma Negra Compania and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA and Loma Negra 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 Loma Negra Compania are associated (or correlated) with Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Loma Negra i.e., Loma Negra and Cementos Pacasmayo go up and down completely randomly.
Pair Corralation between Loma Negra and Cementos Pacasmayo
Given the investment horizon of 90 days Loma Negra Compania is expected to generate 1.25 times more return on investment than Cementos Pacasmayo. However, Loma Negra is 1.25 times more volatile than Cementos Pacasmayo SAA. It trades about 0.14 of its potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about 0.04 per unit of risk. If you would invest 710.00 in Loma Negra Compania on August 24, 2024 and sell it today you would earn a total of 331.00 from holding Loma Negra Compania or generate 46.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loma Negra Compania vs. Cementos Pacasmayo SAA
Performance |
| Timeline |
| Loma Negra Compania |
| Cementos Pacasmayo SAA |
Loma Negra and Cementos Pacasmayo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loma Negra and Cementos Pacasmayo
The main advantage of trading using opposite Loma Negra and Cementos Pacasmayo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loma Negra position performs unexpectedly, Cementos Pacasmayo 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 Cementos Pacasmayo will offset losses from the drop in Cementos Pacasmayo's long position.| Loma Negra vs. James Hardie Industries | Loma Negra vs. Summit Materials | Loma Negra vs. United States Lime | Loma Negra vs. Eagle Materials |
| Cementos Pacasmayo vs. Summit Materials | Cementos Pacasmayo vs. Eagle Materials | Cementos Pacasmayo vs. United States Lime | Cementos Pacasmayo vs. James Hardie Industries |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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