Correlation Between Caixabank and Parlem Telecom

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

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

Diversification Opportunities for Caixabank and Parlem Telecom

-0.17

Correlation Coefficient

Caixabank  Parlem Telecom

Good diversification

The 3 months correlation between Caixabank and Parlem is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Parlem Telecom Companyia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parlem Telecom ia and Caixabank 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 Caixabank SA are associated (or correlated) with Parlem Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parlem Telecom ia has no effect on the direction of Caixabank i.e., Caixabank and Parlem Telecom go up and down completely randomly.

Pair Corralation between Caixabank and Parlem Telecom

Assuming the 90 days trading horizon Caixabank SA is expected to under-perform the Parlem Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Caixabank SA is 1.62 times less risky than Parlem Telecom. The stock trades about -0.03 of its potential returns per unit of risk. The Parlem Telecom Companyia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  330.00  in Parlem Telecom Companyia on October 9, 2024 and sell it today you would earn a total of  10.00  from holding Parlem Telecom Companyia or generate 3.03% return on investment over 90 days.

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

Caixabank SA  vs.  Parlem Telecom Companyia

Caixabank SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Parlem Telecom ia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parlem Telecom Companyia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Parlem Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caixabank and Parlem Telecom

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

The idea behind Caixabank SA and Parlem Telecom Companyia 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.