Correlation Between Industrias Electro and Metalurgica Peruana

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

By analyzing existing cross correlation between Industrias Electro Quimicas and Metalurgica Peruana SA, you can compare the effects of market volatilities on Industrias Electro and Metalurgica Peruana 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 Industrias Electro with a short position of Metalurgica Peruana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrias Electro and Metalurgica Peruana.

Diversification Opportunities for Industrias Electro and Metalurgica Peruana

0.0

Correlation Coefficient

Industrias Electro  Metalurgica Peruana

Pay attention - limited upside

The 3 months correlation between Industrias and Metalurgica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Electro Quimicas and Metalurgica Peruana SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalurgica Peruana and Industrias Electro 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 Industrias Electro Quimicas are associated (or correlated) with Metalurgica Peruana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalurgica Peruana has no effect on the direction of Industrias Electro i.e., Industrias Electro and Metalurgica Peruana go up and down completely randomly.

Pair Corralation between Industrias Electro and Metalurgica Peruana

If you would invest (100.00) in Metalurgica Peruana SA on December 26, 2024 and sell it today you would earn a total of  100.00  from holding Metalurgica Peruana SA or generate -100.0% return on investment over 90 days.

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

Industrias Electro Quimicas  vs.  Metalurgica Peruana SA

Industrias Electro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrias Electro Quimicas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrias Electro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metalurgica Peruana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metalurgica Peruana SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Metalurgica Peruana is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrias Electro and Metalurgica Peruana

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

The idea behind Industrias Electro Quimicas and Metalurgica Peruana 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.