Correlation Between Compania and Nexa Resources

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

By analyzing existing cross correlation between Compania de Minas and Nexa Resources Peru, you can compare the effects of market volatilities on Compania and Nexa Resources 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 Compania with a short position of Nexa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Nexa Resources.

Diversification Opportunities for Compania and Nexa Resources

-0.12

Correlation Coefficient

Compania  Nexa Resources

Good diversification

The 3 months correlation between Compania and Nexa is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Nexa Resources Peru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexa Resources Peru and Compania 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 Compania de Minas are associated (or correlated) with Nexa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexa Resources Peru has no effect on the direction of Compania i.e., Compania and Nexa Resources go up and down completely randomly.

Pair Corralation between Compania and Nexa Resources

Assuming the 90 days trading horizon Compania de Minas is expected to generate 0.91 times more return on investment than Nexa Resources. However, Compania de Minas is 1.1 times less risky than Nexa Resources. It trades about 0.09 of its potential returns per unit of risk. Nexa Resources Peru is currently generating about -0.05 per unit of risk. If you would invest  1,370  in Compania de Minas on December 24, 2024 and sell it today you would earn a total of  170.00  from holding Compania de Minas or generate 12.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

Compania de Minas  vs.  Nexa Resources Peru

Compania de Minas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Compania displayed solid returns over the last few months and may actually be approaching a breakup point.

Nexa Resources Peru

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nexa Resources Peru has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Compania and Nexa Resources

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

The idea behind Compania de Minas and Nexa Resources Peru 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.