Correlation Between Luz Del and Corporacion Aceros

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

By analyzing existing cross correlation between Luz del Sur and Corporacion Aceros Arequipa, you can compare the effects of market volatilities on Luz Del and Corporacion Aceros 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 Luz Del with a short position of Corporacion Aceros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luz Del and Corporacion Aceros.

Diversification Opportunities for Luz Del and Corporacion Aceros

0.5

Correlation Coefficient

Luz Del  Corporacion Aceros

Very weak diversification

The 3 months correlation between Luz and Corporacion is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Luz del Sur and Corporacion Aceros Arequipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion Aceros and Luz Del 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 Luz del Sur are associated (or correlated) with Corporacion Aceros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion Aceros has no effect on the direction of Luz Del i.e., Luz Del and Corporacion Aceros go up and down completely randomly.

Pair Corralation between Luz Del and Corporacion Aceros

Assuming the 90 days trading horizon Luz del Sur is expected to under-perform the Corporacion Aceros. But the stock apears to be less risky and, when comparing its historical volatility, Luz del Sur is 1.35 times less risky than Corporacion Aceros. The stock trades about -0.14 of its potential returns per unit of risk. The Corporacion Aceros Arequipa is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Corporacion Aceros Arequipa on December 26, 2024 and sell it today you would earn a total of  1.00  from holding Corporacion Aceros Arequipa or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Luz del Sur  vs.  Corporacion Aceros Arequipa

Luz del Sur

Risk-Adjusted Performance

Very Weak

Over the last 90 days Luz del Sur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Corporacion Aceros

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion Aceros Arequipa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Corporacion Aceros is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Luz Del and Corporacion Aceros

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

The idea behind Luz del Sur and Corporacion Aceros Arequipa 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.