Correlation Between Mattel and Empresa Distribuidora

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

By analyzing existing cross correlation between Mattel Inc and Empresa Distribuidora y, you can compare the effects of market volatilities on Mattel and Empresa Distribuidora 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 Mattel with a short position of Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mattel and Empresa Distribuidora.

Diversification Opportunities for Mattel and Empresa Distribuidora

-0.25

Correlation Coefficient

Mattel  Empresa Distribuidora

Very good diversification

The 3 months correlation between Mattel and Empresa is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Mattel 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 Mattel Inc are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Mattel i.e., Mattel and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Mattel and Empresa Distribuidora

Considering the 90-day investment horizon Mattel Inc is expected to generate 0.26 times more return on investment than Empresa Distribuidora. However, Mattel Inc is 3.87 times less risky than Empresa Distribuidora. It trades about -0.12 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about -0.18 per unit of risk. If you would invest  1,903  in Mattel Inc on October 11, 2024 and sell it today you would lose (60.00) from holding Mattel Inc or give up 3.15% of portfolio value over 90 days.

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

Mattel Inc  vs.  Empresa Distribuidora y

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Empresa Distribuidora

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mattel and Empresa Distribuidora

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

The idea behind Mattel Inc and Empresa Distribuidora 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.