Correlation Between Compania and Central Puerto

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

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

Diversification Opportunities for Compania and Central Puerto

0.91

Correlation Coefficient

Compania  Central Puerto

Almost no diversification

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

Pair Corralation between Compania and Central Puerto

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 1.04 times more return on investment than Central Puerto. However, Compania is 1.04 times more volatile than Central Puerto SA. It trades about 0.15 of its potential returns per unit of risk. Central Puerto SA is currently generating about 0.13 per unit of risk. If you would invest  20,750  in Compania de Transporte on October 11, 2024 and sell it today you would earn a total of  274,750  from holding Compania de Transporte or generate 1324.1% return on investment over 90 days.

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

Compania de Transporte  vs.  Central Puerto SA

Compania de Transporte

Risk-Adjusted Performance

18 of 100

Solid

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

Central Puerto SA

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Puerto sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Central Puerto

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

The idea behind Compania de Transporte and Central Puerto 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.