Correlation Between Compania and Agrometal SAI
Can any of the company-specific risk be diversified away by investing in both Compania and Agrometal SAI 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 Compania and Agrometal SAI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Transporte and Agrometal SAI, you can compare the effects of market volatilities on Compania and Agrometal SAI 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 Compania with a short position of Agrometal SAI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Agrometal SAI.
Diversification Opportunities for Compania and Agrometal SAI
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compania and Agrometal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Agrometal SAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agrometal SAI and Compania 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 Compania de Transporte are associated (or correlated) with Agrometal SAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agrometal SAI has no effect on the direction of Compania i.e., Compania and Agrometal SAI go up and down completely randomly.
Pair Corralation between Compania and Agrometal SAI
Assuming the 90 days trading horizon Compania de Transporte is expected to under-perform the Agrometal SAI. In addition to that, Compania is 1.12 times more volatile than Agrometal SAI. It trades about -0.25 of its total potential returns per unit of risk. Agrometal SAI is currently generating about -0.23 per unit of volatility. If you would invest 7,570 in Agrometal SAI on October 20, 2024 and sell it today you would lose (950.00) from holding Agrometal SAI or give up 12.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. Agrometal SAI
Performance |
| Timeline |
| Compania de Transporte |
| Agrometal SAI |
Compania and Agrometal SAI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Agrometal SAI
The main advantage of trading using opposite Compania and Agrometal SAI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Agrometal SAI 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 Agrometal SAI will offset losses from the drop in Agrometal SAI's long position.| Compania vs. Pampa Energia SA | Compania vs. American Express Co | Compania vs. Transportadora de Gas | Compania vs. Central Puerto SA |
| Agrometal SAI vs. Transportadora de Gas | Agrometal SAI vs. Harmony Gold Mining | Agrometal SAI vs. United States Steel | Agrometal SAI vs. Telecom Argentina |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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