Correlation Between Urbas Grupo and Berkeley Energia

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

By analyzing existing cross correlation between Urbas Grupo Financiero and Berkeley Energia Limited, you can compare the effects of market volatilities on Urbas Grupo and Berkeley Energia 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 Urbas Grupo with a short position of Berkeley Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urbas Grupo and Berkeley Energia.

Diversification Opportunities for Urbas Grupo and Berkeley Energia

0.41

Correlation Coefficient

Urbas Grupo  Berkeley Energia

Very weak diversification

The 3 months correlation between Urbas and Berkeley is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Urbas Grupo Financiero and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia and Urbas Grupo 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 Urbas Grupo Financiero are associated (or correlated) with Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of Urbas Grupo i.e., Urbas Grupo and Berkeley Energia go up and down completely randomly.

Pair Corralation between Urbas Grupo and Berkeley Energia

Assuming the 90 days trading horizon Urbas Grupo Financiero is expected to under-perform the Berkeley Energia. In addition to that, Urbas Grupo is 2.58 times more volatile than Berkeley Energia Limited. It trades about -0.07 of its total potential returns per unit of risk. Berkeley Energia Limited is currently generating about 0.01 per unit of volatility. If you would invest  21.00  in Berkeley Energia Limited on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Berkeley Energia Limited or generate 0.0% return on investment over 90 days.

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

Urbas Grupo Financiero  vs.  Berkeley Energia Limited

Urbas Grupo Financiero

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Urbas Grupo Financiero has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Berkeley Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkeley Energia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Berkeley Energia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Urbas Grupo and Berkeley Energia

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

The idea behind Urbas Grupo Financiero and Berkeley Energia Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.