Correlation Between Cementos Pacasmayo and PACCAR

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

By analyzing existing cross correlation between Cementos Pacasmayo SAA and PACCAR Inc, you can compare the effects of market volatilities on Cementos Pacasmayo and PACCAR 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 Cementos Pacasmayo with a short position of PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cementos Pacasmayo and PACCAR.

Diversification Opportunities for Cementos Pacasmayo and PACCAR

0.42

Correlation Coefficient

Cementos Pacasmayo  PACCAR

Very weak diversification

The 3 months correlation between Cementos and PACCAR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and PACCAR go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and PACCAR

Given the investment horizon of 90 days Cementos Pacasmayo is expected to generate 3.6 times less return on investment than PACCAR. In addition to that, Cementos Pacasmayo is 1.13 times more volatile than PACCAR Inc. It trades about 0.05 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.19 per unit of volatility. If you would invest  9,483  in PACCAR Inc on September 12, 2024 and sell it today you would earn a total of  2,195  from holding PACCAR Inc or generate 23.15% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  PACCAR Inc

Cementos Pacasmayo SAA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

PACCAR Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cementos Pacasmayo and PACCAR

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

The idea behind Cementos Pacasmayo SAA and PACCAR Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.