Correlation Between Cabot and Sociedad Quimica

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

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

Diversification Opportunities for Cabot and Sociedad Quimica

0.5

Correlation Coefficient

Cabot  Sociedad Quimica

Very weak diversification

The 3 months correlation between Cabot and Sociedad is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y and Cabot 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 Cabot are associated (or correlated) with Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of Cabot i.e., Cabot and Sociedad Quimica go up and down completely randomly.

Pair Corralation between Cabot and Sociedad Quimica

Considering the 90-day investment horizon Cabot is expected to under-perform the Sociedad Quimica. In addition to that, Cabot is 1.0 times more volatile than Sociedad Quimica y. It trades about -0.72 of its total potential returns per unit of risk. Sociedad Quimica y is currently generating about -0.37 per unit of volatility. If you would invest  4,037  in Sociedad Quimica y on October 8, 2024 and sell it today you would lose (367.00) from holding Sociedad Quimica y or give up 9.09% of portfolio value over 90 days.

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

Cabot  vs.  Sociedad Quimica y

Cabot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sociedad Quimica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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.

Pair Trading with Cabot and Sociedad Quimica

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

The idea behind Cabot and Sociedad Quimica 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.