Correlation Between Multiexport Foods and Sociedad Qumica

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

By analyzing existing cross correlation between Multiexport Foods SA and Sociedad Qumica y, you can compare the effects of market volatilities on Multiexport Foods and Sociedad Qumica 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 Multiexport Foods with a short position of Sociedad Qumica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multiexport Foods and Sociedad Qumica.

Diversification Opportunities for Multiexport Foods and Sociedad Qumica

-0.56

Correlation Coefficient

Multiexport Foods  Sociedad Qumica

Excellent diversification

The 3 months correlation between Multiexport and Sociedad is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Multiexport Foods SA and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y and Multiexport Foods 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 Multiexport Foods SA are associated (or correlated) with Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of Multiexport Foods i.e., Multiexport Foods and Sociedad Qumica go up and down completely randomly.

Pair Corralation between Multiexport Foods and Sociedad Qumica

Assuming the 90 days trading horizon Multiexport Foods SA is expected to generate 0.46 times more return on investment than Sociedad Qumica. However, Multiexport Foods SA is 2.19 times less risky than Sociedad Qumica. It trades about -0.02 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about -0.03 per unit of risk. If you would invest  22,852  in Multiexport Foods SA on September 12, 2024 and sell it today you would lose (2,452) from holding Multiexport Foods SA or give up 10.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.37%
Values	Daily Returns

Multiexport Foods SA  vs.  Sociedad Qumica y

Multiexport Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multiexport Foods SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, Multiexport Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sociedad Qumica y

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sociedad Qumica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multiexport Foods and Sociedad Qumica

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

The idea behind Multiexport Foods SA and Sociedad Qumica 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.