Correlation Between United States and Promotora
Can any of the company-specific risk be diversified away by investing in both United States and Promotora 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 Promotora 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 Promotora y Operadora, you can compare the effects of market volatilities on United States and Promotora 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 Promotora. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Promotora.
Diversification Opportunities for United States and Promotora
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Promotora is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Promotora y Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promotora y Operadora 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 Promotora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promotora y Operadora has no effect on the direction of United States i.e., United States and Promotora go up and down completely randomly.
Pair Corralation between United States and Promotora
Given the investment horizon of 90 days United States Steel is expected to generate 2.41 times more return on investment than Promotora. However, United States is 2.41 times more volatile than Promotora y Operadora. It trades about 0.15 of its potential returns per unit of risk. Promotora y Operadora is currently generating about 0.21 per unit of risk. If you would invest 76,568 in United States Steel on August 28, 2024 and sell it today you would earn a total of 8,212 from holding United States Steel or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Promotora y Operadora
Performance |
| Timeline |
| United States Steel |
| Promotora y Operadora |
United States and Promotora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Promotora
The main advantage of trading using opposite United States and Promotora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Promotora 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 Promotora will offset losses from the drop in Promotora's long position.| United States vs. The Select Sector | United States vs. Promotora y Operadora | United States vs. iShares Global Timber | United States vs. SPDR Series Trust |
| Promotora vs. Grupo Financiero Inbursa | Promotora vs. Kimberly Clark de Mxico | Promotora vs. Grupo Televisa SAB | Promotora vs. Grupo Bimbo SAB |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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