Correlation Between Compania and Instituto Rosenbusch

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

Diversification Opportunities for Compania and Instituto Rosenbusch

0.71

Correlation Coefficient

Compania  Instituto Rosenbusch

Poor diversification

The 3 months correlation between Compania and Instituto is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Instituto Rosenbusch SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Instituto Rosenbusch 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 Instituto Rosenbusch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Instituto Rosenbusch has no effect on the direction of Compania i.e., Compania and Instituto Rosenbusch go up and down completely randomly.

Pair Corralation between Compania and Instituto Rosenbusch

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 1.92 times more return on investment than Instituto Rosenbusch. However, Compania is 1.92 times more volatile than Instituto Rosenbusch SA. It trades about 0.24 of its potential returns per unit of risk. Instituto Rosenbusch SA is currently generating about 0.05 per unit of risk. If you would invest  230,000  in Compania de Transporte on October 8, 2024 and sell it today you would earn a total of  53,000  from holding Compania de Transporte or generate 23.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Compania de Transporte  vs.  Instituto Rosenbusch SA

Compania de Transporte

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 16 (%) 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.

Instituto Rosenbusch

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Instituto Rosenbusch SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Instituto Rosenbusch sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Instituto Rosenbusch

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

The idea behind Compania de Transporte and Instituto Rosenbusch 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.