Correlation Between Compania and Carboclor
Can any of the company-specific risk be diversified away by investing in both Compania and Carboclor 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 Carboclor 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 Carboclor, you can compare the effects of market volatilities on Compania and Carboclor 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 Carboclor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Carboclor.
Diversification Opportunities for Compania and Carboclor
Very weak diversification
The 3 months correlation between Compania and Carboclor is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Carboclor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carboclor 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 Carboclor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carboclor has no effect on the direction of Compania i.e., Compania and Carboclor go up and down completely randomly.
Pair Corralation between Compania and Carboclor
Assuming the 90 days trading horizon Compania is expected to generate 1.08 times less return on investment than Carboclor. But when comparing it to its historical volatility, Compania de Transporte is 1.52 times less risky than Carboclor. It trades about 0.33 of its potential returns per unit of risk. Carboclor is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,805 in Carboclor on September 12, 2024 and sell it today you would earn a total of 535.00 from holding Carboclor or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. Carboclor
Performance |
| Timeline |
| Compania de Transporte |
| Carboclor |
Compania and Carboclor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Carboclor
The main advantage of trading using opposite Compania and Carboclor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Carboclor 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 Carboclor will offset losses from the drop in Carboclor's long position.| Compania vs. Edesa Holding SA | Compania vs. Vista Energy, SAB | Compania vs. United States Steel | Compania vs. Pfizer Inc |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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