Correlation Between Corporacion Aceros and Luz Del

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

By analyzing existing cross correlation between Corporacion Aceros Arequipa and Luz del Sur, you can compare the effects of market volatilities on Corporacion Aceros and Luz Del 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 Corporacion Aceros with a short position of Luz Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporacion Aceros and Luz Del.

Diversification Opportunities for Corporacion Aceros and Luz Del

0.01

Correlation Coefficient

Corporacion Aceros  Luz Del

Significant diversification

The 3 months correlation between Corporacion and Luz is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion Aceros Arequipa and Luz del Sur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luz del Sur and Corporacion Aceros 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 Corporacion Aceros Arequipa are associated (or correlated) with Luz Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luz del Sur has no effect on the direction of Corporacion Aceros i.e., Corporacion Aceros and Luz Del go up and down completely randomly.

Pair Corralation between Corporacion Aceros and Luz Del

Assuming the 90 days trading horizon Corporacion Aceros Arequipa is expected to under-perform the Luz Del. In addition to that, Corporacion Aceros is 1.83 times more volatile than Luz del Sur. It trades about -0.04 of its total potential returns per unit of risk. Luz del Sur is currently generating about -0.07 per unit of volatility. If you would invest  1,520  in Luz del Sur on October 26, 2024 and sell it today you would lose (30.00) from holding Luz del Sur or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.33%
Values	Daily Returns

Corporacion Aceros Arequipa  vs.  Luz del Sur

Corporacion Aceros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporacion Aceros Arequipa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Corporacion Aceros is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Luz del Sur

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luz del Sur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Luz Del is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Corporacion Aceros and Luz Del

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

The idea behind Corporacion Aceros Arequipa and Luz del Sur 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.