Correlation Between Longvie SA and Central Puerto

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

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

Diversification Opportunities for Longvie SA and Central Puerto

0.76

Correlation Coefficient

Longvie SA  Central Puerto

Poor diversification

The 3 months correlation between Longvie and Central is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Longvie SA and Central Puerto SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Puerto SA and Longvie SA 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 Longvie SA are associated (or correlated) with Central Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Puerto SA has no effect on the direction of Longvie SA i.e., Longvie SA and Central Puerto go up and down completely randomly.

Pair Corralation between Longvie SA and Central Puerto

Assuming the 90 days trading horizon Longvie SA is expected to under-perform the Central Puerto. But the stock apears to be less risky and, when comparing its historical volatility, Longvie SA is 1.24 times less risky than Central Puerto. The stock trades about -0.07 of its potential returns per unit of risk. The Central Puerto SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  165,000  in Central Puerto SA on December 22, 2024 and sell it today you would lose (2,500) from holding Central Puerto SA or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Longvie SA  vs.  Central Puerto SA

Longvie SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Longvie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Central Puerto SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Longvie SA and Central Puerto

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

The idea behind Longvie SA and Central Puerto 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.