Correlation Between Banco Macro and Pampa Energia

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

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

Diversification Opportunities for Banco Macro and Pampa Energia

0.69

Correlation Coefficient

Banco Macro  Pampa Energia

Poor diversification

The 3 months correlation between Banco and Pampa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Banco Macro 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 Banco Macro SA are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Banco Macro i.e., Banco Macro and Pampa Energia go up and down completely randomly.

Pair Corralation between Banco Macro and Pampa Energia

Considering the 90-day investment horizon Banco Macro SA is expected to under-perform the Pampa Energia. In addition to that, Banco Macro is 1.28 times more volatile than Pampa Energia SA. It trades about -0.2 of its total potential returns per unit of risk. Pampa Energia SA is currently generating about -0.23 per unit of volatility. If you would invest  8,943  in Pampa Energia SA on December 2, 2024 and sell it today you would lose (1,262) from holding Pampa Energia SA or give up 14.11% of portfolio value over 90 days.

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

Banco Macro SA  vs.  Pampa Energia SA

Banco Macro SA

Risk-Adjusted Performance

Very Weak

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

Pampa Energia SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pampa Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Banco Macro and Pampa Energia

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

The idea behind Banco Macro SA and Pampa Energia 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.