Correlation Between Industria and Duro Felguera

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

Diversification Opportunities for Industria and Duro Felguera

0.02

Correlation Coefficient

Industria  Duro Felguera

Significant diversification

The 3 months correlation between Industria and Duro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Duro Felguera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duro Felguera 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 Duro Felguera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duro Felguera has no effect on the direction of Industria i.e., Industria and Duro Felguera go up and down completely randomly.

Pair Corralation between Industria and Duro Felguera

Assuming the 90 days trading horizon Industria de Diseno is expected to under-perform the Duro Felguera. But the stock apears to be less risky and, when comparing its historical volatility, Industria de Diseno is 4.41 times less risky than Duro Felguera. The stock trades about -0.06 of its potential returns per unit of risk. The Duro Felguera is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Duro Felguera on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Duro Felguera or generate 34.78% return on investment over 90 days.

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

Industria de Diseno  vs.  Duro Felguera

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.

Duro Felguera

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duro Felguera are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Duro Felguera exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industria and Duro Felguera

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

The idea behind Industria de Diseno and Duro Felguera 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.