Correlation Between Parq Arauco and Masisa

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

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

Diversification Opportunities for Parq Arauco and Masisa

-0.05

Correlation Coefficient

Parq Arauco  Masisa

Good diversification

The 3 months correlation between Parq and Masisa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Parq Arauco and Masisa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masisa and Parq Arauco 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 Parq Arauco are associated (or correlated) with Masisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masisa has no effect on the direction of Parq Arauco i.e., Parq Arauco and Masisa go up and down completely randomly.

Pair Corralation between Parq Arauco and Masisa

Assuming the 90 days trading horizon Parq Arauco is expected to generate 0.71 times more return on investment than Masisa. However, Parq Arauco is 1.42 times less risky than Masisa. It trades about 0.14 of its potential returns per unit of risk. Masisa is currently generating about -0.1 per unit of risk. If you would invest  157,000  in Parq Arauco on December 2, 2024 and sell it today you would earn a total of  16,020  from holding Parq Arauco or generate 10.2% return on investment over 90 days.

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

Parq Arauco  vs.  Masisa

Parq Arauco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parq Arauco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Parq Arauco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Masisa

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Parq Arauco and Masisa

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

The idea behind Parq Arauco and Masisa 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.