Correlation Between Berkeley Energia and Altia Consultores

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

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

Diversification Opportunities for Berkeley Energia and Altia Consultores

0.84

Correlation Coefficient

Berkeley Energia  Altia Consultores

Very poor diversification

The 3 months correlation between Berkeley and Altia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energia Limited and Altia Consultores SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altia Consultores and Berkeley Energia 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 Berkeley Energia Limited are associated (or correlated) with Altia Consultores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altia Consultores has no effect on the direction of Berkeley Energia i.e., Berkeley Energia and Altia Consultores go up and down completely randomly.

Pair Corralation between Berkeley Energia and Altia Consultores

Assuming the 90 days trading horizon Berkeley Energia Limited is expected to generate 3.69 times more return on investment than Altia Consultores. However, Berkeley Energia is 3.69 times more volatile than Altia Consultores SA. It trades about 0.14 of its potential returns per unit of risk. Altia Consultores SA is currently generating about 0.16 per unit of risk. If you would invest  20.00  in Berkeley Energia Limited on December 29, 2024 and sell it today you would earn a total of  12.00  from holding Berkeley Energia Limited or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Berkeley Energia Limited  vs.  Altia Consultores SA

Berkeley Energia

Risk-Adjusted Performance

OK

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

Altia Consultores

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altia Consultores SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Altia Consultores exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkeley Energia and Altia Consultores

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

The idea behind Berkeley Energia Limited and Altia Consultores 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.

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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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.