Correlation Between Inmobiliaria Colonial and Carsales

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

By analyzing existing cross correlation between Inmobiliaria Colonial SOCIMI and CarsalesCom, you can compare the effects of market volatilities on Inmobiliaria Colonial and Carsales 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 Inmobiliaria Colonial with a short position of Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inmobiliaria Colonial and Carsales.

Diversification Opportunities for Inmobiliaria Colonial and Carsales

-0.32

Correlation Coefficient

Inmobiliaria Colonial  Carsales

Very good diversification

The 3 months correlation between Inmobiliaria and Carsales is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Inmobiliaria Colonial SOCIMI and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom and Inmobiliaria Colonial 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 Inmobiliaria Colonial SOCIMI are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Inmobiliaria Colonial i.e., Inmobiliaria Colonial and Carsales go up and down completely randomly.

Pair Corralation between Inmobiliaria Colonial and Carsales

Assuming the 90 days trading horizon Inmobiliaria Colonial SOCIMI is expected to generate 1.35 times more return on investment than Carsales. However, Inmobiliaria Colonial is 1.35 times more volatile than CarsalesCom. It trades about -0.09 of its potential returns per unit of risk. CarsalesCom is currently generating about -0.45 per unit of risk. If you would invest  534.00  in Inmobiliaria Colonial SOCIMI on October 7, 2024 and sell it today you would lose (15.00) from holding Inmobiliaria Colonial SOCIMI or give up 2.81% of portfolio value over 90 days.

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

Inmobiliaria Colonial SOCIMI  vs.  CarsalesCom

Inmobiliaria Colonial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inmobiliaria Colonial SOCIMI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inmobiliaria Colonial and Carsales

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

The idea behind Inmobiliaria Colonial SOCIMI and CarsalesCom 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.