Correlation Between Compania and Loma Negra
Can any of the company-specific risk be diversified away by investing in both Compania and Loma Negra 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 Loma Negra 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 Loma Negra Compania, you can compare the effects of market volatilities on Compania and Loma Negra 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 Loma Negra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Loma Negra.
Diversification Opportunities for Compania and Loma Negra
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Compania and Loma is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania 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 Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Compania i.e., Compania and Loma Negra go up and down completely randomly.
Pair Corralation between Compania and Loma Negra
Assuming the 90 days trading horizon Compania de Transporte is expected to under-perform the Loma Negra. But the stock apears to be less risky and, when comparing its historical volatility, Compania de Transporte is 1.03 times less risky than Loma Negra. The stock trades about -0.25 of its potential returns per unit of risk. The Loma Negra Compania is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 271,000 in Loma Negra Compania on October 20, 2024 and sell it today you would lose (18,500) from holding Loma Negra Compania or give up 6.83% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Compania de Transporte vs. Loma Negra Compania
Performance |
Timeline |
Compania de Transporte |
Loma Negra Compania |
Compania and Loma Negra Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Compania and Loma Negra
The main advantage of trading using opposite Compania and Loma Negra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Loma Negra 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 Loma Negra will offset losses from the drop in Loma Negra's long position.Compania vs. Pampa Energia SA | Compania vs. American Express Co | Compania vs. Transportadora de Gas | Compania vs. Central Puerto SA |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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