Correlation Between Controladora Vuela and TC Energy

Can any of the company-specific risk be diversified away by investing in both Controladora Vuela and TC Energy 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 Controladora Vuela and TC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Controladora Vuela Compaa and TC Energy, you can compare the effects of market volatilities on Controladora Vuela and TC Energy 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 Controladora Vuela with a short position of TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Controladora Vuela and TC Energy.

Diversification Opportunities for Controladora Vuela and TC Energy

0.8

Correlation Coefficient

Controladora Vuela  TC Energy

Very poor diversification

The 3 months correlation between Controladora and TRS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Controladora Vuela Compaa and TC Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy and Controladora Vuela 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 Controladora Vuela Compaa are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy has no effect on the direction of Controladora Vuela i.e., Controladora Vuela and TC Energy go up and down completely randomly.

Pair Corralation between Controladora Vuela and TC Energy

Assuming the 90 days trading horizon Controladora Vuela Compaa is expected to generate 1.2 times more return on investment than TC Energy. However, Controladora Vuela is 1.2 times more volatile than TC Energy. It trades about 0.23 of its potential returns per unit of risk. TC Energy is currently generating about 0.07 per unit of risk. If you would invest  575.00  in Controladora Vuela Compaa on September 22, 2024 and sell it today you would earn a total of  200.00  from holding Controladora Vuela Compaa or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

Controladora Vuela Compaa  vs.  TC Energy

Controladora Vuela Compaa

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Controladora Vuela reported solid returns over the last few months and may actually be approaching a breakup point.

TC Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Controladora Vuela and TC Energy

The main advantage of trading using opposite Controladora Vuela and TC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Controladora Vuela position performs unexpectedly, TC Energy 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 TC Energy will offset losses from the drop in TC Energy's long position.

The idea behind Controladora Vuela Compaa and TC Energy 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.