Correlation Between Cia De and Inmobiliaria Colonial

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

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

Diversification Opportunities for Cia De and Inmobiliaria Colonial

-0.81

Correlation Coefficient

Cia De  Inmobiliaria Colonial

Pay attention - limited upside

The 3 months correlation between Cia and Inmobiliaria is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cia de Distribucion and Inmobiliaria Colonial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inmobiliaria Colonial and Cia De 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 Cia de Distribucion are associated (or correlated) with Inmobiliaria Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inmobiliaria Colonial has no effect on the direction of Cia De i.e., Cia De and Inmobiliaria Colonial go up and down completely randomly.

Pair Corralation between Cia De and Inmobiliaria Colonial

Assuming the 90 days trading horizon Cia de Distribucion is expected to generate 0.54 times more return on investment than Inmobiliaria Colonial. However, Cia de Distribucion is 1.85 times less risky than Inmobiliaria Colonial. It trades about 0.11 of its potential returns per unit of risk. Inmobiliaria Colonial SA is currently generating about -0.22 per unit of risk. If you would invest  2,794  in Cia de Distribucion on September 13, 2024 and sell it today you would earn a total of  150.00  from holding Cia de Distribucion or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Cia de Distribucion  vs.  Inmobiliaria Colonial SA

Cia de Distribucion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cia de Distribucion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cia De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Inmobiliaria Colonial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inmobiliaria Colonial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cia De and Inmobiliaria Colonial

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

The idea behind Cia de Distribucion and Inmobiliaria Colonial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.