Correlation Between Borges Agricultural and Tecnicas Reunidas

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

By analyzing existing cross correlation between Borges Agricultural Industrial and Tecnicas Reunidas, you can compare the effects of market volatilities on Borges Agricultural and Tecnicas Reunidas 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 Borges Agricultural with a short position of Tecnicas Reunidas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Borges Agricultural and Tecnicas Reunidas.

Diversification Opportunities for Borges Agricultural and Tecnicas Reunidas

0.82

Correlation Coefficient

Borges Agricultural  Tecnicas Reunidas

Very poor diversification

The 3 months correlation between Borges and Tecnicas is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Borges Agricultural Industrial and Tecnicas Reunidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnicas Reunidas and Borges Agricultural 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 Borges Agricultural Industrial are associated (or correlated) with Tecnicas Reunidas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnicas Reunidas has no effect on the direction of Borges Agricultural i.e., Borges Agricultural and Tecnicas Reunidas go up and down completely randomly.

Pair Corralation between Borges Agricultural and Tecnicas Reunidas

Assuming the 90 days trading horizon Borges Agricultural is expected to generate 2.37 times less return on investment than Tecnicas Reunidas. But when comparing it to its historical volatility, Borges Agricultural Industrial is 1.09 times less risky than Tecnicas Reunidas. It trades about 0.13 of its potential returns per unit of risk. Tecnicas Reunidas is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,092  in Tecnicas Reunidas on December 21, 2024 and sell it today you would earn a total of  543.00  from holding Tecnicas Reunidas or generate 49.73% return on investment over 90 days.

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

Borges Agricultural Industrial  vs.  Tecnicas Reunidas

Borges Agricultural

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Borges Agricultural Industrial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Borges Agricultural exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tecnicas Reunidas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tecnicas Reunidas are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Tecnicas Reunidas exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Borges Agricultural and Tecnicas Reunidas

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

The idea behind Borges Agricultural Industrial and Tecnicas Reunidas 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.