Correlation Between Cresud SA and Compania

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

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

Diversification Opportunities for Cresud SA and Compania

0.88

Correlation Coefficient

Cresud SA  Compania

Very poor diversification

The 3 months correlation between Cresud and Compania is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cresud SA and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and Cresud SA 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 Cresud SA are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Cresud SA i.e., Cresud SA and Compania go up and down completely randomly.

Pair Corralation between Cresud SA and Compania

Assuming the 90 days trading horizon Cresud SA is expected to generate 1.38 times less return on investment than Compania. But when comparing it to its historical volatility, Cresud SA is 1.03 times less risky than Compania. It trades about 0.12 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  19,325  in Compania de Transporte on October 10, 2024 and sell it today you would earn a total of  286,675  from holding Compania de Transporte or generate 1483.44% return on investment over 90 days.

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

Cresud SA  vs.  Compania de Transporte

Cresud SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cresud SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cresud SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Compania de Transporte

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cresud SA and Compania

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

The idea behind Cresud SA and Compania de Transporte 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.