Correlation Between Molinos Rio and Compania Introductora

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

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

Diversification Opportunities for Molinos Rio and Compania Introductora

0.64

Correlation Coefficient

Molinos Rio  Compania Introductora

Poor diversification

The 3 months correlation between Molinos and Compania is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Molinos Rio de and Compania Introductora de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Introductora and Molinos Rio 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 Molinos Rio de are associated (or correlated) with Compania Introductora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Introductora has no effect on the direction of Molinos Rio i.e., Molinos Rio and Compania Introductora go up and down completely randomly.

Pair Corralation between Molinos Rio and Compania Introductora

Assuming the 90 days trading horizon Molinos Rio de is expected to generate 1.44 times more return on investment than Compania Introductora. However, Molinos Rio is 1.44 times more volatile than Compania Introductora de. It trades about 0.1 of its potential returns per unit of risk. Compania Introductora de is currently generating about 0.03 per unit of risk. If you would invest  353,500  in Molinos Rio de on September 14, 2024 and sell it today you would earn a total of  65,000  from holding Molinos Rio de or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Molinos Rio de  vs.  Compania Introductora de

Molinos Rio de

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molinos Rio de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Molinos Rio sustained solid returns over the last few months and may actually be approaching a breakup point.

Compania Introductora

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Introductora de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Compania Introductora is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Molinos Rio and Compania Introductora

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

The idea behind Molinos Rio de and Compania Introductora 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.