Correlation Between Promotora and Textron

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

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

Diversification Opportunities for Promotora and Textron

-0.38

Correlation Coefficient

Promotora  Textron

Very good diversification

The 3 months correlation between Promotora and Textron is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron and Promotora 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 Promotora y Operadora are associated (or correlated) with Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Promotora i.e., Promotora and Textron go up and down completely randomly.

Pair Corralation between Promotora and Textron

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 289.63 times more return on investment than Textron. However, Promotora is 289.63 times more volatile than Textron. It trades about 0.08 of its potential returns per unit of risk. Textron is currently generating about 0.22 per unit of risk. If you would invest  14,390  in Promotora y Operadora on September 24, 2024 and sell it today you would earn a total of  330.00  from holding Promotora y Operadora or generate 2.29% return on investment over 90 days.

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

Promotora y Operadora  vs.  Textron

Promotora y Operadora

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

Textron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Textron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Promotora and Textron

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

The idea behind Promotora y Operadora and Textron 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.