Correlation Between Altarea SCA and Carmila SA

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

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

Diversification Opportunities for Altarea SCA and Carmila SA

0.32

Correlation Coefficient

Altarea SCA  Carmila SA

Weak diversification

The 3 months correlation between Altarea and Carmila is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Altarea SCA and Carmila SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmila SA and Altarea SCA 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 Altarea SCA are associated (or correlated) with Carmila SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmila SA has no effect on the direction of Altarea SCA i.e., Altarea SCA and Carmila SA go up and down completely randomly.

Pair Corralation between Altarea SCA and Carmila SA

Assuming the 90 days trading horizon Altarea SCA is expected to under-perform the Carmila SA. In addition to that, Altarea SCA is 1.58 times more volatile than Carmila SA. It trades about -0.02 of its total potential returns per unit of risk. Carmila SA is currently generating about -0.02 per unit of volatility. If you would invest  1,674  in Carmila SA on September 3, 2024 and sell it today you would lose (24.00) from holding Carmila SA or give up 1.43% of portfolio value over 90 days.

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

Altarea SCA  vs.  Carmila SA

Altarea SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altarea SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Altarea SCA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carmila SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmila SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carmila SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Altarea SCA and Carmila SA

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

The idea behind Altarea SCA and Carmila 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.