Correlation Between Monarch Cement and Loma Negra

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

By analyzing existing cross correlation between The Monarch Cement and Loma Negra Compania, you can compare the effects of market volatilities on Monarch Cement and Loma Negra 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 Monarch Cement with a short position of Loma Negra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monarch Cement and Loma Negra.

Diversification Opportunities for Monarch Cement and Loma Negra

-0.43

Correlation Coefficient

Monarch Cement  Loma Negra

Very good diversification

The 3 months correlation between Monarch and Loma is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Monarch Cement and Loma Negra Compania in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loma Negra Compania and Monarch Cement 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 The Monarch Cement are associated (or correlated) with Loma Negra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loma Negra Compania has no effect on the direction of Monarch Cement i.e., Monarch Cement and Loma Negra go up and down completely randomly.

Pair Corralation between Monarch Cement and Loma Negra

Given the investment horizon of 90 days The Monarch Cement is expected to generate 0.33 times more return on investment than Loma Negra. However, The Monarch Cement is 3.02 times less risky than Loma Negra. It trades about 0.04 of its potential returns per unit of risk. Loma Negra Compania is currently generating about -0.02 per unit of risk. If you would invest  21,731  in The Monarch Cement on December 28, 2024 and sell it today you would earn a total of  469.00  from holding The Monarch Cement or generate 2.16% return on investment over 90 days.

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

The Monarch Cement  vs.  Loma Negra Compania

Monarch Cement

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Monarch Cement is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Loma Negra Compania

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Monarch Cement and Loma Negra

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

The idea behind The Monarch Cement and Loma Negra Compania 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.