Correlation Between Oil Terminal and Mecanica

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

By analyzing existing cross correlation between Oil Terminal C and Mecanica Sa Ce, you can compare the effects of market volatilities on Oil Terminal and Mecanica 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 Oil Terminal with a short position of Mecanica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Terminal and Mecanica.

Diversification Opportunities for Oil Terminal and Mecanica

0.15

Correlation Coefficient

Oil Terminal  Mecanica

Average diversification

The 3 months correlation between Oil and Mecanica is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Oil Terminal C and Mecanica Sa Ce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mecanica Sa Ce and Oil Terminal 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 Oil Terminal C are associated (or correlated) with Mecanica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mecanica Sa Ce has no effect on the direction of Oil Terminal i.e., Oil Terminal and Mecanica go up and down completely randomly.

Pair Corralation between Oil Terminal and Mecanica

Assuming the 90 days trading horizon Oil Terminal C is expected to under-perform the Mecanica. But the stock apears to be less risky and, when comparing its historical volatility, Oil Terminal C is 3.2 times less risky than Mecanica. The stock trades about -0.01 of its potential returns per unit of risk. The Mecanica Sa Ce is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Mecanica Sa Ce on October 22, 2024 and sell it today you would lose (2.00) from holding Mecanica Sa Ce or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.55%
Values	Daily Returns

Oil Terminal C  vs.  Mecanica Sa Ce

Oil Terminal C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Terminal C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Oil Terminal is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mecanica Sa Ce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mecanica Sa Ce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Mecanica is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Oil Terminal and Mecanica

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

The idea behind Oil Terminal C and Mecanica Sa Ce 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.