Correlation Between United States and Compania
Can any of the company-specific risk be diversified away by investing in both United States and Compania 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 Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Compania de Transporte, you can compare the effects of market volatilities on United States and Compania 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 Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Compania.
Diversification Opportunities for United States and Compania
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Compania is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Steel are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of United States i.e., United States and Compania go up and down completely randomly.
Pair Corralation between United States and Compania
Given the investment horizon of 90 days United States is expected to generate 3.61 times less return on investment than Compania. In addition to that, United States is 1.19 times more volatile than Compania de Transporte. It trades about 0.02 of its total potential returns per unit of risk. Compania de Transporte is currently generating about 0.1 per unit of volatility. If you would invest 160,100 in Compania de Transporte on August 23, 2024 and sell it today you would earn a total of 60,900 from holding Compania de Transporte or generate 38.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Compania de Transporte
Performance |
| Timeline |
| United States Steel |
| Compania de Transporte |
United States and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Compania
The main advantage of trading using opposite United States and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.| United States vs. Pfizer Inc | United States vs. Garovaglio y Zorraquin | United States vs. Telecom Argentina | United States vs. Harmony Gold Mining |
| Compania vs. United States Steel | Compania vs. Pfizer Inc | Compania vs. Garovaglio y Zorraquin | Compania vs. Ternium SA DRC |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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