Correlation Between Plaza SA and Administradora Americana

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

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

Diversification Opportunities for Plaza SA and Administradora Americana

0.5

Correlation Coefficient

Plaza SA  Administradora Americana

Very weak diversification

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

Pair Corralation between Plaza SA and Administradora Americana

Assuming the 90 days trading horizon Plaza SA is expected to generate 1.16 times more return on investment than Administradora Americana. However, Plaza SA is 1.16 times more volatile than Administradora Americana de. It trades about 0.12 of its potential returns per unit of risk. Administradora Americana de is currently generating about 0.05 per unit of risk. If you would invest  108,998  in Plaza SA on December 3, 2024 and sell it today you would earn a total of  79,012  from holding Plaza SA or generate 72.49% return on investment over 90 days.

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

Plaza SA  vs.  Administradora Americana de

Plaza SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plaza SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Plaza SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Administradora Americana

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Administradora Americana de are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Administradora Americana may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Plaza SA and Administradora Americana

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

The idea behind Plaza SA and Administradora Americana de 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.