Correlation Between Mapfre and Almirall
Can any of the company-specific risk be diversified away by investing in both Mapfre and Almirall 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 Mapfre and Almirall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mapfre and Almirall SA, you can compare the effects of market volatilities on Mapfre and Almirall 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 Mapfre with a short position of Almirall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mapfre and Almirall.
Diversification Opportunities for Mapfre and Almirall
Significant diversification
The 3 months correlation between Mapfre and Almirall is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mapfre and Almirall SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almirall SA and Mapfre 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 Mapfre are associated (or correlated) with Almirall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almirall SA has no effect on the direction of Mapfre i.e., Mapfre and Almirall go up and down completely randomly.
Pair Corralation between Mapfre and Almirall
Assuming the 90 days trading horizon Mapfre is expected to generate 0.62 times more return on investment than Almirall. However, Mapfre is 1.6 times less risky than Almirall. It trades about -0.17 of its potential returns per unit of risk. Almirall SA is currently generating about -0.16 per unit of risk. If you would invest 258.00 in Mapfre on August 31, 2024 and sell it today you would lose (9.00) from holding Mapfre or give up 3.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mapfre vs. Almirall SA
Performance |
| Timeline |
| Mapfre |
| Almirall SA |
Mapfre and Almirall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mapfre and Almirall
The main advantage of trading using opposite Mapfre and Almirall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mapfre position performs unexpectedly, Almirall 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 Almirall will offset losses from the drop in Almirall's long position.The idea behind Mapfre and Almirall 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.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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