Correlation Between Corporacion Aceros and Sociedad Minera

Can any of the company-specific risk be diversified away by investing in both Corporacion Aceros and Sociedad Minera 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 Sociedad Minera 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 Sociedad Minera Corona, you can compare the effects of market volatilities on Corporacion Aceros and Sociedad Minera 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 Sociedad Minera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporacion Aceros and Sociedad Minera.

Diversification Opportunities for Corporacion Aceros and Sociedad Minera

-0.48

Correlation Coefficient

Corporacion Aceros  Sociedad Minera

Very good diversification

The 3 months correlation between Corporacion and Sociedad is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion Aceros Arequipa and Sociedad Minera Corona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Minera Corona 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 Sociedad Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Minera Corona has no effect on the direction of Corporacion Aceros i.e., Corporacion Aceros and Sociedad Minera go up and down completely randomly.

Pair Corralation between Corporacion Aceros and Sociedad Minera

Assuming the 90 days trading horizon Corporacion Aceros Arequipa is expected to under-perform the Sociedad Minera. But the stock apears to be less risky and, when comparing its historical volatility, Corporacion Aceros Arequipa is 1.01 times less risky than Sociedad Minera. The stock trades about -0.03 of its potential returns per unit of risk. The Sociedad Minera Corona is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,320  in Sociedad Minera Corona on October 27, 2024 and sell it today you would lose (20.00) from holding Sociedad Minera Corona or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.82%
Values	Daily Returns

Corporacion Aceros Arequipa  vs.  Sociedad Minera Corona

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Sociedad Minera Corona

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Minera Corona has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sociedad Minera is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Corporacion Aceros and Sociedad Minera

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

The idea behind Corporacion Aceros Arequipa and Sociedad Minera Corona 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.