Correlation Between Empresa Nacional and CAP SA

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

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

Diversification Opportunities for Empresa Nacional and CAP SA

0.29

Correlation Coefficient

Empresa Nacional  CAP SA

Modest diversification

The 3 months correlation between Empresa and CAP is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Nacional de and CAP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP SA and Empresa Nacional 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 Empresa Nacional de are associated (or correlated) with CAP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP SA has no effect on the direction of Empresa Nacional i.e., Empresa Nacional and CAP SA go up and down completely randomly.

Pair Corralation between Empresa Nacional and CAP SA

Assuming the 90 days trading horizon Empresa Nacional de is expected to generate 0.98 times more return on investment than CAP SA. However, Empresa Nacional de is 1.02 times less risky than CAP SA. It trades about -0.02 of its potential returns per unit of risk. CAP SA is currently generating about -0.02 per unit of risk. If you would invest  295,280  in Empresa Nacional de on December 30, 2024 and sell it today you would lose (4,280) from holding Empresa Nacional de or give up 1.45% of portfolio value over 90 days.

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

Empresa Nacional de  vs.  CAP SA

Empresa Nacional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Nacional de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Empresa Nacional is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CAP SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAP SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CAP SA is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Empresa Nacional and CAP SA

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

The idea behind Empresa Nacional de and CAP 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.