Correlation Between Industria and Prosegur Cash

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

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

Diversification Opportunities for Industria and Prosegur Cash

0.14

Correlation Coefficient

Industria  Prosegur Cash

Average diversification

The 3 months correlation between Industria and Prosegur is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Prosegur Cash SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosegur Cash SA and Industria 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 Industria de Diseno are associated (or correlated) with Prosegur Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosegur Cash SA has no effect on the direction of Industria i.e., Industria and Prosegur Cash go up and down completely randomly.

Pair Corralation between Industria and Prosegur Cash

Assuming the 90 days trading horizon Industria de Diseno is expected to under-perform the Prosegur Cash. But the stock apears to be less risky and, when comparing its historical volatility, Industria de Diseno is 1.08 times less risky than Prosegur Cash. The stock trades about -0.02 of its potential returns per unit of risk. The Prosegur Cash SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Prosegur Cash SA on December 1, 2024 and sell it today you would earn a total of  11.00  from holding Prosegur Cash SA or generate 20.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Industria de Diseno  vs.  Prosegur Cash SA

Industria de Diseno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Industria is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Prosegur Cash SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prosegur Cash SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Prosegur Cash exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industria and Prosegur Cash

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

The idea behind Industria de Diseno and Prosegur Cash 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.