Correlation Between Pea Verde and Alfa SAB

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

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

Diversification Opportunities for Pea Verde and Alfa SAB

0.0

Correlation Coefficient

Pea Verde  Alfa SAB

Pay attention - limited upside

The 3 months correlation between Pea and Alfa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Pea Verde SAB and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and Pea Verde 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 Pea Verde SAB are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of Pea Verde i.e., Pea Verde and Alfa SAB go up and down completely randomly.

Pair Corralation between Pea Verde and Alfa SAB

Assuming the 90 days horizon Pea Verde SAB is expected to under-perform the Alfa SAB. But the stock apears to be less risky and, when comparing its historical volatility, Pea Verde SAB is 1.11 times less risky than Alfa SAB. The stock trades about -0.06 of its potential returns per unit of risk. The Alfa SAB de is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,058  in Alfa SAB de on September 24, 2024 and sell it today you would earn a total of  488.00  from holding Alfa SAB de or generate 46.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.65%
Values	Daily Returns

Pea Verde SAB  vs.  Alfa SAB de

Pea Verde SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alfa SAB de

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Alfa SAB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pea Verde and Alfa SAB

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

The idea behind Pea Verde SAB and Alfa SAB de 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.