Correlation Between Colbun and Administradora Americana

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

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

Diversification Opportunities for Colbun and Administradora Americana

0.83

Correlation Coefficient

Colbun  Administradora Americana

Very poor diversification

The 3 months correlation between Colbun and Administradora is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Colbun and Administradora Americana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Administradora Americana and Colbun 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 Colbun are associated (or correlated) with Administradora Americana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Administradora Americana has no effect on the direction of Colbun i.e., Colbun and Administradora Americana go up and down completely randomly.

Pair Corralation between Colbun and Administradora Americana

Assuming the 90 days trading horizon Colbun is expected to generate 3.5 times less return on investment than Administradora Americana. But when comparing it to its historical volatility, Colbun is 1.82 times less risky than Administradora Americana. It trades about 0.12 of its potential returns per unit of risk. Administradora Americana de is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  19,806  in Administradora Americana de on October 9, 2024 and sell it today you would earn a total of  1,485  from holding Administradora Americana de or generate 7.5% return on investment over 90 days.

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

Colbun  vs.  Administradora Americana de

Colbun

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Colbun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Administradora Americana

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Administradora Americana de are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Administradora Americana unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colbun and Administradora Americana

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

The idea behind Colbun and Administradora Americana de 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.