Correlation Between Empresas Copec and Plaza SA

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

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

Diversification Opportunities for Empresas Copec and Plaza SA

0.57

Correlation Coefficient

Empresas Copec  Plaza SA

Very weak diversification

The 3 months correlation between Empresas and Plaza is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Empresas Copec SA and Plaza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza SA and Empresas Copec 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 Empresas Copec SA are associated (or correlated) with Plaza SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza SA has no effect on the direction of Empresas Copec i.e., Empresas Copec and Plaza SA go up and down completely randomly.

Pair Corralation between Empresas Copec and Plaza SA

Assuming the 90 days trading horizon Empresas Copec is expected to generate 2.24 times less return on investment than Plaza SA. In addition to that, Empresas Copec is 1.1 times more volatile than Plaza SA. It trades about 0.05 of its total potential returns per unit of risk. Plaza SA is currently generating about 0.12 per unit of volatility. If you would invest  152,920  in Plaza SA on September 12, 2024 and sell it today you would earn a total of  13,980  from holding Plaza SA or generate 9.14% return on investment over 90 days.

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

Empresas Copec SA  vs.  Plaza SA

Empresas Copec SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas Copec SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresas Copec is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Plaza SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Plaza SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Empresas Copec and Plaza SA

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

The idea behind Empresas Copec SA and Plaza 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.