Correlation Between Compania and Pampa Energia
Can any of the company-specific risk be diversified away by investing in both Compania and Pampa Energia 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 Pampa Energia 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 Pampa Energia SA, you can compare the effects of market volatilities on Compania and Pampa Energia 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 Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Pampa Energia.
Diversification Opportunities for Compania and Pampa Energia
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compania and Pampa is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Compania i.e., Compania and Pampa Energia go up and down completely randomly.
Pair Corralation between Compania and Pampa Energia
Assuming the 90 days trading horizon Compania de Transporte is expected to generate 0.92 times more return on investment than Pampa Energia. However, Compania de Transporte is 1.09 times less risky than Pampa Energia. It trades about 0.01 of its potential returns per unit of risk. Pampa Energia SA is currently generating about -0.02 per unit of risk. If you would invest 283,000 in Compania de Transporte on November 2, 2024 and sell it today you would lose (1,000.00) from holding Compania de Transporte or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Compania de Transporte vs. Pampa Energia SA
Performance |
| Timeline |
| Compania de Transporte |
| Pampa Energia SA |
Compania and Pampa Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Pampa Energia
The main advantage of trading using opposite Compania and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.The idea behind Compania de Transporte and Pampa Energia 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.| Pampa Energia vs. Transportadora de Gas | Pampa Energia vs. Compania de Transporte | Pampa Energia vs. United States Steel | Pampa Energia vs. Harmony Gold Mining |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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