Correlation Between Datang International and Pampa Energia

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

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

Diversification Opportunities for Datang International and Pampa Energia

0.43

Correlation Coefficient

Datang International  Pampa Energia

Very weak diversification

The 3 months correlation between Datang and Pampa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Datang International 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 Datang International Power are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Datang International i.e., Datang International and Pampa Energia go up and down completely randomly.

Pair Corralation between Datang International and Pampa Energia

Assuming the 90 days horizon Datang International is expected to generate 1.15 times less return on investment than Pampa Energia. In addition to that, Datang International is 1.3 times more volatile than Pampa Energia SA. It trades about 0.07 of its total potential returns per unit of risk. Pampa Energia SA is currently generating about 0.1 per unit of volatility. If you would invest  2,804  in Pampa Energia SA on September 10, 2024 and sell it today you would earn a total of  5,938  from holding Pampa Energia SA or generate 211.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	38.38%
Values	Daily Returns

Datang International Power  vs.  Pampa Energia SA

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pampa Energia SA

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Pampa Energia displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datang International and Pampa Energia

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

The idea behind Datang International Power and Pampa Energia 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.