Correlation Between OtelloASA and Pampa Energía

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

By analyzing existing cross correlation between Otello ASA and Pampa Energa SA, you can compare the effects of market volatilities on OtelloASA and Pampa Energía 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 OtelloASA with a short position of Pampa Energía. Check out your portfolio center. Please also check ongoing floating volatility patterns of OtelloASA and Pampa Energía.

Diversification Opportunities for OtelloASA and Pampa Energía

0.46

Correlation Coefficient

OtelloASA  Pampa Energía

Very weak diversification

The 3 months correlation between OtelloASA and Pampa is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Otello ASA and Pampa Energa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energa SA and OtelloASA 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 Otello ASA are associated (or correlated) with Pampa Energía. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energa SA has no effect on the direction of OtelloASA i.e., OtelloASA and Pampa Energía go up and down completely randomly.

Pair Corralation between OtelloASA and Pampa Energía

Assuming the 90 days horizon Otello ASA is expected to generate 0.36 times more return on investment than Pampa Energía. However, Otello ASA is 2.81 times less risky than Pampa Energía. It trades about -0.08 of its potential returns per unit of risk. Pampa Energa SA is currently generating about -0.06 per unit of risk. If you would invest  66.00  in Otello ASA on December 5, 2024 and sell it today you would lose (4.00) from holding Otello ASA or give up 6.06% of portfolio value over 90 days.

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

Otello ASA  vs.  Pampa Energa SA

Otello ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OtelloASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pampa Energa SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pampa Energa SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with OtelloASA and Pampa Energía

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

The idea behind Otello ASA and Pampa Energa SA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.