Correlation Between Loma Negra and ReTo Eco

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

By analyzing existing cross correlation between Loma Negra Compania and ReTo Eco Solutions, you can compare the effects of market volatilities on Loma Negra and ReTo Eco 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 Loma Negra with a short position of ReTo Eco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loma Negra and ReTo Eco.

Diversification Opportunities for Loma Negra and ReTo Eco

-0.59

Correlation Coefficient

Loma Negra  ReTo Eco

Excellent diversification

The 3 months correlation between Loma and ReTo is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Loma Negra Compania and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions and Loma Negra 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 Loma Negra Compania are associated (or correlated) with ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of Loma Negra i.e., Loma Negra and ReTo Eco go up and down completely randomly.

Pair Corralation between Loma Negra and ReTo Eco

Given the investment horizon of 90 days Loma Negra Compania is expected to generate 1.13 times more return on investment than ReTo Eco. However, Loma Negra is 1.13 times more volatile than ReTo Eco Solutions. It trades about 0.19 of its potential returns per unit of risk. ReTo Eco Solutions is currently generating about 0.1 per unit of risk. If you would invest  1,099  in Loma Negra Compania on September 18, 2024 and sell it today you would earn a total of  170.00  from holding Loma Negra Compania or generate 15.47% return on investment over 90 days.

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

Loma Negra Compania  vs.  ReTo Eco Solutions

Loma Negra Compania

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loma Negra Compania are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Loma Negra sustained solid returns over the last few months and may actually be approaching a breakup point.

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Loma Negra and ReTo Eco

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

The idea behind Loma Negra Compania and ReTo Eco Solutions 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.