Correlation Between Administradora Americana and Sonda SA

Can any of the company-specific risk be diversified away by investing in both Administradora Americana and Sonda SA 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 Administradora Americana and Sonda SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Administradora Americana de and Sonda SA, you can compare the effects of market volatilities on Administradora Americana and Sonda SA 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 Administradora Americana with a short position of Sonda SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Administradora Americana and Sonda SA.

Diversification Opportunities for Administradora Americana and Sonda SA

-0.53

Correlation Coefficient

Administradora Americana  Sonda SA

Excellent diversification

The 3 months correlation between Administradora and Sonda is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Administradora Americana de and Sonda SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonda SA and Administradora Americana 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 Administradora Americana de are associated (or correlated) with Sonda SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonda SA has no effect on the direction of Administradora Americana i.e., Administradora Americana and Sonda SA go up and down completely randomly.

Pair Corralation between Administradora Americana and Sonda SA

Assuming the 90 days trading horizon Administradora Americana de is expected to generate 1.31 times more return on investment than Sonda SA. However, Administradora Americana is 1.31 times more volatile than Sonda SA. It trades about 0.21 of its potential returns per unit of risk. Sonda SA is currently generating about -0.04 per unit of risk. If you would invest  16,500  in Administradora Americana de on September 16, 2024 and sell it today you would earn a total of  3,151  from holding Administradora Americana de or generate 19.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Administradora Americana de  vs.  Sonda SA

Administradora Americana

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Administradora Americana de are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Administradora Americana unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sonda SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonda SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sonda SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Administradora Americana and Sonda SA

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

The idea behind Administradora Americana de and Sonda SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.