Correlation Between Transportadora and Cresud SA

Can any of the company-specific risk be diversified away by investing in both Transportadora and Cresud 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 Cresud 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 Cresud SA, you can compare the effects of market volatilities on Transportadora and Cresud 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 Cresud SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Cresud SA.

Diversification Opportunities for Transportadora and Cresud SA

0.91

Correlation Coefficient

Transportadora  Cresud SA

Almost no diversification

The 3 months correlation between Transportadora and Cresud is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Cresud SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresud 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 Cresud SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresud SA has no effect on the direction of Transportadora i.e., Transportadora and Cresud SA go up and down completely randomly.

Pair Corralation between Transportadora and Cresud SA

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 1.19 times more return on investment than Cresud SA. However, Transportadora is 1.19 times more volatile than Cresud SA. It trades about 0.42 of its potential returns per unit of risk. Cresud SA is currently generating about 0.15 per unit of risk. If you would invest  617,000  in Transportadora de Gas on October 8, 2024 and sell it today you would earn a total of  159,000  from holding Transportadora de Gas or generate 25.77% return on investment over 90 days.

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

Transportadora de Gas  vs.  Cresud SA

Transportadora de Gas

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

Cresud SA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cresud SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cresud SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and Cresud SA

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

The idea behind Transportadora de Gas and Cresud 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.