Correlation Between AFP Provida and Sociedad Matriz

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

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

Diversification Opportunities for AFP Provida and Sociedad Matriz

0.54

Correlation Coefficient

AFP Provida  Sociedad Matriz

Very weak diversification

The 3 months correlation between AFP and Sociedad is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AFP Provida and Sociedad Matriz SAAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Matriz SAAM and AFP Provida 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 AFP Provida are associated (or correlated) with Sociedad Matriz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Matriz SAAM has no effect on the direction of AFP Provida i.e., AFP Provida and Sociedad Matriz go up and down completely randomly.

Pair Corralation between AFP Provida and Sociedad Matriz

Assuming the 90 days trading horizon AFP Provida is expected to generate 2.59 times more return on investment than Sociedad Matriz. However, AFP Provida is 2.59 times more volatile than Sociedad Matriz SAAM. It trades about 0.36 of its potential returns per unit of risk. Sociedad Matriz SAAM is currently generating about 0.11 per unit of risk. If you would invest  275,297  in AFP Provida on December 3, 2024 and sell it today you would earn a total of  135,913  from holding AFP Provida or generate 49.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

AFP Provida  vs.  Sociedad Matriz SAAM

AFP Provida

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Provida are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, AFP Provida sustained solid returns over the last few months and may actually be approaching a breakup point.

Sociedad Matriz SAAM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Matriz SAAM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sociedad Matriz is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AFP Provida and Sociedad Matriz

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

The idea behind AFP Provida and Sociedad Matriz SAAM 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.