Correlation Between Transportadora and ALD SA

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

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

Diversification Opportunities for Transportadora and ALD SA

0.16

Correlation Coefficient

Transportadora  ALD SA

Average diversification

The 3 months correlation between Transportadora and ALD is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA and Transportadora 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 Transportadora de Gas are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of Transportadora i.e., Transportadora and ALD SA go up and down completely randomly.

Pair Corralation between Transportadora and ALD SA

Assuming the 90 days trading horizon Transportadora de Gas is expected to under-perform the ALD SA. In addition to that, Transportadora is 2.49 times more volatile than ALD SA. It trades about -0.06 of its total potential returns per unit of risk. ALD SA is currently generating about 0.1 per unit of volatility. If you would invest  596.00  in ALD SA on September 27, 2024 and sell it today you would earn a total of  25.00  from holding ALD SA or generate 4.19% return on investment over 90 days.

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

Transportadora de Gas  vs.  ALD SA

Transportadora de Gas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

ALD SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transportadora and ALD SA

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

The idea behind Transportadora de Gas and ALD SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.