Correlation Between Compania and Empresa Distribuidora

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

Diversification Opportunities for Compania and Empresa Distribuidora

0.0

Correlation Coefficient

Compania  Empresa Distribuidora

Pay attention - limited upside

The 3 months correlation between Compania and Empresa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Empresa Distribuidora Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Compania i.e., Compania and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Compania and Empresa Distribuidora

If you would invest  19,325  in Compania de Transporte on October 10, 2024 and sell it today you would earn a total of  286,675  from holding Compania de Transporte or generate 1483.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.58%
Values	Daily Returns

Compania de Transporte  vs.  Empresa Distribuidora Electric

Compania de Transporte

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 19 (%) 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.

Empresa Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empresa Distribuidora Electrica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Empresa Distribuidora is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania and Empresa Distribuidora

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

The idea behind Compania de Transporte and Empresa Distribuidora Electrica 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.