Correlation Between Sociedad Matriz and AFP Provida

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

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

Diversification Opportunities for Sociedad Matriz and AFP Provida

0.77

Correlation Coefficient

Sociedad Matriz  AFP Provida

Poor diversification

The 3 months correlation between Sociedad and AFP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Matriz SAAM and AFP Provida in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFP Provida and Sociedad Matriz 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 Sociedad Matriz SAAM are associated (or correlated) with AFP Provida. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFP Provida has no effect on the direction of Sociedad Matriz i.e., Sociedad Matriz and AFP Provida go up and down completely randomly.

Pair Corralation between Sociedad Matriz and AFP Provida

Assuming the 90 days trading horizon Sociedad Matriz is expected to generate 4.59 times less return on investment than AFP Provida. But when comparing it to its historical volatility, Sociedad Matriz SAAM is 2.85 times less risky than AFP Provida. It trades about 0.19 of its potential returns per unit of risk. AFP Provida is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  300,000  in AFP Provida on December 29, 2024 and sell it today you would earn a total of  139,900  from holding AFP Provida or generate 46.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sociedad Matriz SAAM  vs.  AFP Provida

Sociedad Matriz SAAM

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Matriz SAAM are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Sociedad Matriz may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AFP Provida

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AFP Provida are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AFP Provida sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sociedad Matriz and AFP Provida

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

The idea behind Sociedad Matriz SAAM and AFP Provida 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.