Correlation Between Compa Sibiu and Romcab SA

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

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

Diversification Opportunities for Compa Sibiu and Romcab SA

-0.24

Correlation Coefficient

Compa Sibiu  Romcab SA

Very good diversification

The 3 months correlation between Compa and Romcab is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Compa Sibiu and Romcab SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Romcab SA and Compa Sibiu 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 Compa Sibiu are associated (or correlated) with Romcab SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Romcab SA has no effect on the direction of Compa Sibiu i.e., Compa Sibiu and Romcab SA go up and down completely randomly.

Pair Corralation between Compa Sibiu and Romcab SA

Assuming the 90 days trading horizon Compa Sibiu is expected to under-perform the Romcab SA. But the stock apears to be less risky and, when comparing its historical volatility, Compa Sibiu is 4.79 times less risky than Romcab SA. The stock trades about 0.0 of its potential returns per unit of risk. The Romcab SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2.08  in Romcab SA on December 21, 2024 and sell it today you would earn a total of  1.64  from holding Romcab SA or generate 78.85% return on investment over 90 days.

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

Compa Sibiu  vs.  Romcab SA

Compa Sibiu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compa Sibiu has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Compa Sibiu is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Romcab SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Romcab SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Romcab SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compa Sibiu and Romcab SA

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

The idea behind Compa Sibiu and Romcab SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.