Correlation Between Pampa Energía and China Communications

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Can any of the company-specific risk be diversified away by investing in both Pampa Energía and China Communications 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 Pampa Energía and China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pampa Energa SA and China Communications Services, you can compare the effects of market volatilities on Pampa Energía and China Communications 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 Pampa Energía with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pampa Energía and China Communications.

Diversification Opportunities for Pampa Energía and China Communications

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Pampa and China is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Energa SA and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Pampa Energía 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 Pampa Energa SA are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Pampa Energía i.e., Pampa Energía and China Communications go up and down completely randomly.

Pair Corralation between Pampa Energía and China Communications

Assuming the 90 days trading horizon Pampa Energa SA is expected to generate 2.26 times more return on investment than China Communications. However, Pampa Energía is 2.26 times more volatile than China Communications Services. It trades about 0.04 of its potential returns per unit of risk. China Communications Services is currently generating about 0.01 per unit of risk. If you would invest  8,400  in Pampa Energa SA on October 24, 2024 and sell it today you would earn a total of  100.00  from holding Pampa Energa SA or generate 1.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Pampa Energa SA  vs.  China Communications Services

 Performance 
       Timeline  
Pampa Energa SA 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energa SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pampa Energía reported solid returns over the last few months and may actually be approaching a breakup point.
China Communications 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pampa Energía and China Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pampa Energía and China Communications

The main advantage of trading using opposite Pampa Energía and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pampa Energía position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.
The idea behind Pampa Energa SA and China Communications Services 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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