Correlation Between Buyer Group and Compania

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

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

Diversification Opportunities for Buyer Group and Compania

0.32

Correlation Coefficient

Buyer Group  Compania

Weak diversification

The 3 months correlation between Buyer and Compania is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Buyer Group International and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas and Buyer Group 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 Buyer Group International are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Buyer Group i.e., Buyer Group and Compania go up and down completely randomly.

Pair Corralation between Buyer Group and Compania

Given the investment horizon of 90 days Buyer Group International is expected to generate 3.47 times more return on investment than Compania. However, Buyer Group is 3.47 times more volatile than Compania de Minas. It trades about 0.04 of its potential returns per unit of risk. Compania de Minas is currently generating about -0.08 per unit of risk. If you would invest  0.14  in Buyer Group International on October 15, 2024 and sell it today you would earn a total of  0.00  from holding Buyer Group International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Buyer Group International  vs.  Compania de Minas

Buyer Group International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Buyer Group International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Buyer Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Buyer Group and Compania

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

The idea behind Buyer Group International and Compania de Minas 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.