Correlation Between Empresa Nacional and Sonda SA

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

Diversification Opportunities for Empresa Nacional and Sonda SA

-0.1

Correlation Coefficient

Empresa Nacional  Sonda SA

Good diversification

The 3 months correlation between Empresa and Sonda is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Nacional de and Sonda SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonda 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 Sonda SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonda SA has no effect on the direction of Empresa Nacional i.e., Empresa Nacional and Sonda SA go up and down completely randomly.

Pair Corralation between Empresa Nacional and Sonda SA

Assuming the 90 days trading horizon Empresa Nacional de is expected to generate 1.09 times more return on investment than Sonda SA. However, Empresa Nacional is 1.09 times more volatile than Sonda SA. It trades about -0.02 of its potential returns per unit of risk. Sonda SA is currently generating about -0.04 per unit of risk. If you would invest  304,910  in Empresa Nacional de on September 16, 2024 and sell it today you would lose (5,580) from holding Empresa Nacional de or give up 1.83% of portfolio value over 90 days.

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

Empresa Nacional de  vs.  Sonda SA

Empresa Nacional

Risk-Adjusted Performance

0 of 100

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.

Sonda SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Empresa Nacional and Sonda SA

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

The idea behind Empresa Nacional de and Sonda 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.