Correlation Between AdCapital and Controladora Vuela

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

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

Diversification Opportunities for AdCapital and Controladora Vuela

-0.94

Correlation Coefficient

AdCapital  Controladora Vuela

Pay attention - limited upside

The 3 months correlation between AdCapital and Controladora is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding AdCapital AG and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa and AdCapital 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 AdCapital AG are associated (or correlated) with Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of AdCapital i.e., AdCapital and Controladora Vuela go up and down completely randomly.

Pair Corralation between AdCapital and Controladora Vuela

Assuming the 90 days horizon AdCapital AG is expected to under-perform the Controladora Vuela. In addition to that, AdCapital is 1.02 times more volatile than Controladora Vuela Compaa. It trades about -0.07 of its total potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.23 per unit of volatility. 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AdCapital AG  vs.  Controladora Vuela Compaa

AdCapital AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdCapital AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 uncertain fundamental indicators, Controladora Vuela reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdCapital and Controladora Vuela

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

The idea behind AdCapital AG and Controladora Vuela Compaa 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.