Correlation Between United States and Loma Negra
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and Loma Negra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Lime and Loma Negra Compania, you can compare the effects of market volatilities on United States 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 United States with a short position of Loma Negra. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Loma Negra.
Diversification Opportunities for United States and Loma Negra
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Loma is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding United States Lime 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 United States 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 United States Lime 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 United States i.e., United States and Loma Negra go up and down completely randomly.
Pair Corralation between United States and Loma Negra
Given the investment horizon of 90 days United States Lime is expected to generate 1.01 times more return on investment than Loma Negra. However, United States is 1.01 times more volatile than Loma Negra Compania. It trades about 0.24 of its potential returns per unit of risk. Loma Negra Compania is currently generating about 0.11 per unit of risk. If you would invest 5,091 in United States Lime on August 27, 2024 and sell it today you would earn a total of 9,882 from holding United States Lime or generate 194.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Lime vs. Loma Negra Compania
Performance |
| Timeline |
| United States Lime |
| Loma Negra Compania |
United States and Loma Negra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Loma Negra
The main advantage of trading using opposite United States and Loma Negra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Smith Midland Corp | United States vs. Holcim | United States vs. Lafargeholcim Ltd ADR | United States vs. Cementos Pacasmayo SAA |
| Loma Negra vs. Holcim | Loma Negra vs. Lafargeholcim Ltd ADR | Loma Negra vs. Eagle Materials | Loma Negra vs. The Monarch Cement |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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