Correlation Between Central Puerto and United States

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

By analyzing existing cross correlation between Central Puerto SA and United States Steel, you can compare the effects of market volatilities on Central Puerto and United States 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 Central Puerto with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Puerto and United States.

Diversification Opportunities for Central Puerto and United States

-0.54

Correlation Coefficient

Central Puerto  United States

Excellent diversification

The 3 months correlation between Central and United is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Central Puerto 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 Central Puerto SA are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Central Puerto i.e., Central Puerto and United States go up and down completely randomly.

Pair Corralation between Central Puerto and United States

Assuming the 90 days trading horizon Central Puerto SA is expected to under-perform the United States. In addition to that, Central Puerto is 1.23 times more volatile than United States Steel. It trades about -0.06 of its total potential returns per unit of risk. United States Steel is currently generating about 0.25 per unit of volatility. If you would invest  1,237,500  in United States Steel on December 30, 2024 and sell it today you would earn a total of  635,000  from holding United States Steel or generate 51.31% return on investment over 90 days.

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

Central Puerto SA  vs.  United States Steel

Central Puerto SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United States Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Puerto and United States

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

The idea behind Central Puerto SA and United States Steel 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.