Correlation Between CIE Automotive and Construcciones

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

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

Diversification Opportunities for CIE Automotive and Construcciones

-0.72

Correlation Coefficient

CIE Automotive  Construcciones

Pay attention - limited upside

The 3 months correlation between CIE and Construcciones is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding CIE Automotive SA and Construcciones y Auxiliar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construcciones y Auxiliar and CIE Automotive 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 CIE Automotive SA are associated (or correlated) with Construcciones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construcciones y Auxiliar has no effect on the direction of CIE Automotive i.e., CIE Automotive and Construcciones go up and down completely randomly.

Pair Corralation between CIE Automotive and Construcciones

Assuming the 90 days trading horizon CIE Automotive SA is expected to under-perform the Construcciones. In addition to that, CIE Automotive is 1.12 times more volatile than Construcciones y Auxiliar. It trades about -0.04 of its total potential returns per unit of risk. Construcciones y Auxiliar is currently generating about 0.22 per unit of volatility. If you would invest  3,405  in Construcciones y Auxiliar on December 23, 2024 and sell it today you would earn a total of  615.00  from holding Construcciones y Auxiliar or generate 18.06% return on investment over 90 days.

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

CIE Automotive SA  vs.  Construcciones y Auxiliar

CIE Automotive SA

Risk-Adjusted Performance

Very Weak

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

Construcciones y Auxiliar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Construcciones y Auxiliar are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Construcciones exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIE Automotive and Construcciones

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

The idea behind CIE Automotive SA and Construcciones y Auxiliar 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.