Correlation Between Compania and Rimac Seguros

Can any of the company-specific risk be diversified away by investing in both Compania and Rimac Seguros 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 Rimac Seguros 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 Rimac Seguros y, you can compare the effects of market volatilities on Compania and Rimac Seguros 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 Rimac Seguros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Rimac Seguros.

Diversification Opportunities for Compania and Rimac Seguros

0.2

Correlation Coefficient

Compania  Rimac Seguros

Modest diversification

The 3 months correlation between Compania and Rimac is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Rimac Seguros y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimac Seguros y 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 Rimac Seguros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimac Seguros y has no effect on the direction of Compania i.e., Compania and Rimac Seguros go up and down completely randomly.

Pair Corralation between Compania and Rimac Seguros

Assuming the 90 days trading horizon Compania de Minas is expected to generate 2.25 times more return on investment than Rimac Seguros. However, Compania is 2.25 times more volatile than Rimac Seguros y. It trades about 0.01 of its potential returns per unit of risk. Rimac Seguros y is currently generating about 0.0 per unit of risk. If you would invest  1,264  in Compania de Minas on October 11, 2024 and sell it today you would lose (1.00) from holding Compania de Minas or give up 0.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	45.0%
Values	Daily Returns

Compania de Minas  vs.  Rimac Seguros y

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Rimac Seguros y

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Rimac Seguros y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent technical and fundamental indicators, Rimac Seguros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Rimac Seguros

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

The idea behind Compania de Minas and Rimac Seguros y 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.