Correlation Between Azucar Minerals and Palamina Corp

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

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

Diversification Opportunities for Azucar Minerals and Palamina Corp

-0.29

Correlation Coefficient

Azucar Minerals  Palamina Corp

Very good diversification

The 3 months correlation between Azucar and Palamina is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Azucar Minerals and Palamina Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palamina Corp and Azucar Minerals 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 Azucar Minerals are associated (or correlated) with Palamina Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palamina Corp has no effect on the direction of Azucar Minerals i.e., Azucar Minerals and Palamina Corp go up and down completely randomly.

Pair Corralation between Azucar Minerals and Palamina Corp

Assuming the 90 days horizon Azucar Minerals is expected to generate 1.32 times less return on investment than Palamina Corp. In addition to that, Azucar Minerals is 1.24 times more volatile than Palamina Corp. It trades about 0.02 of its total potential returns per unit of risk. Palamina Corp is currently generating about 0.04 per unit of volatility. If you would invest  8.50  in Palamina Corp on October 5, 2024 and sell it today you would earn a total of  1.50  from holding Palamina Corp or generate 17.65% return on investment over 90 days.

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

Azucar Minerals  vs.  Palamina Corp

Azucar Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Azucar Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Azucar Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Palamina Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palamina Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Azucar Minerals and Palamina Corp

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

The idea behind Azucar Minerals and Palamina Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.