Correlation Between San Miguel and Arca Continental

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

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

Diversification Opportunities for San Miguel and Arca Continental

0.44

Correlation Coefficient

San Miguel  Arca Continental

Very weak diversification

The 3 months correlation between San and Arca is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and San Miguel 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 San Miguel are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of San Miguel i.e., San Miguel and Arca Continental go up and down completely randomly.

Pair Corralation between San Miguel and Arca Continental

Assuming the 90 days horizon San Miguel is expected to under-perform the Arca Continental. In addition to that, San Miguel is 1.54 times more volatile than Arca Continental SAB. It trades about -0.09 of its total potential returns per unit of risk. Arca Continental SAB is currently generating about -0.04 per unit of volatility. If you would invest  933.00  in Arca Continental SAB on September 13, 2024 and sell it today you would lose (59.00) from holding Arca Continental SAB or give up 6.32% of portfolio value over 90 days.

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

San Miguel  vs.  Arca Continental SAB

San Miguel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Miguel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with San Miguel and Arca Continental

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

The idea behind San Miguel and Arca Continental SAB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..