Correlation Between Construcciones and Acerinox

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

By analyzing existing cross correlation between Construcciones y Auxiliar and Acerinox, you can compare the effects of market volatilities on Construcciones and Acerinox 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 Construcciones with a short position of Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construcciones and Acerinox.

Diversification Opportunities for Construcciones and Acerinox

-0.41

Correlation Coefficient

Construcciones  Acerinox

Very good diversification

The 3 months correlation between Construcciones and Acerinox is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Construcciones y Auxiliar and Acerinox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox and Construcciones 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 Construcciones y Auxiliar are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox has no effect on the direction of Construcciones i.e., Construcciones and Acerinox go up and down completely randomly.

Pair Corralation between Construcciones and Acerinox

Assuming the 90 days trading horizon Construcciones y Auxiliar is expected to under-perform the Acerinox. But the stock apears to be less risky and, when comparing its historical volatility, Construcciones y Auxiliar is 1.41 times less risky than Acerinox. The stock trades about -0.06 of its potential returns per unit of risk. The Acerinox is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  885.00  in Acerinox on October 26, 2024 and sell it today you would earn a total of  91.00  from holding Acerinox or generate 10.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Construcciones y Auxiliar  vs.  Acerinox

Construcciones y Auxiliar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Acerinox

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Acerinox may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Construcciones and Acerinox

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

The idea behind Construcciones y Auxiliar and Acerinox 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.