Correlation Between Alumina and El Puerto

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

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

Diversification Opportunities for Alumina and El Puerto

-0.39

Correlation Coefficient

Alumina  El Puerto

Very good diversification

The 3 months correlation between Alumina and ELPQF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and El Puerto de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on El Puerto de and Alumina 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 Alumina Limited are associated (or correlated) with El Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of El Puerto de has no effect on the direction of Alumina i.e., Alumina and El Puerto go up and down completely randomly.

Pair Corralation between Alumina and El Puerto

Assuming the 90 days horizon Alumina Limited is expected to generate 1.02 times more return on investment than El Puerto. However, Alumina is 1.02 times more volatile than El Puerto de. It trades about 0.02 of its potential returns per unit of risk. El Puerto de is currently generating about 0.02 per unit of risk. If you would invest  100.00  in Alumina Limited on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Alumina Limited or generate 11.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.8%
Values	Daily Returns

Alumina Limited  vs.  El Puerto de

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alumina and El Puerto

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

The idea behind Alumina Limited and El Puerto de 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.