Correlation Between Luz Del and Rimac Seguros

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

Diversification Opportunities for Luz Del and Rimac Seguros

0.19

Correlation Coefficient

Luz Del  Rimac Seguros

Average diversification

The 3 months correlation between Luz and Rimac is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Luz del Sur and Rimac Seguros y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimac Seguros y 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 Rimac Seguros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimac Seguros y has no effect on the direction of Luz Del i.e., Luz Del and Rimac Seguros go up and down completely randomly.

Pair Corralation between Luz Del and Rimac Seguros

Assuming the 90 days trading horizon Luz del Sur is expected to under-perform the Rimac Seguros. But the stock apears to be less risky and, when comparing its historical volatility, Luz del Sur is 1.42 times less risky than Rimac Seguros. The stock trades about -0.12 of its potential returns per unit of risk. The Rimac Seguros y is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  95.00  in Rimac Seguros y on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Rimac Seguros y or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	44.83%
Values	Daily Returns

Luz del Sur  vs.  Rimac Seguros y

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 unfluctuating 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.

Rimac Seguros y

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rimac Seguros y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Rimac Seguros is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Luz Del and Rimac Seguros

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

The idea behind Luz del Sur and Rimac Seguros y 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.