Correlation Between Controladora Vuela and State Street

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

By analyzing existing cross correlation between Controladora Vuela Compaa and State Street, you can compare the effects of market volatilities on Controladora Vuela and State Street 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 Controladora Vuela with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Controladora Vuela and State Street.

Diversification Opportunities for Controladora Vuela and State Street

0.68

Correlation Coefficient

Controladora Vuela  State Street

Poor diversification

The 3 months correlation between Controladora and State is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Controladora Vuela Compaa and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and Controladora Vuela 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 Controladora Vuela Compaa are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Controladora Vuela i.e., Controladora Vuela and State Street go up and down completely randomly.

Pair Corralation between Controladora Vuela and State Street

Assuming the 90 days trading horizon Controladora Vuela Compaa is expected to generate 1.14 times more return on investment than State Street. However, Controladora Vuela is 1.14 times more volatile than State Street. It trades about 0.22 of its potential returns per unit of risk. State Street is currently generating about 0.18 per unit of risk. If you would invest  1,294  in Controladora Vuela Compaa on September 17, 2024 and sell it today you would earn a total of  395.00  from holding Controladora Vuela Compaa or generate 30.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Controladora Vuela Compaa  vs.  State Street

Controladora Vuela Compaa

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Controladora Vuela sustained solid returns over the last few months and may actually be approaching a breakup point.

State Street

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Controladora Vuela and State Street

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

The idea behind Controladora Vuela Compaa and State Street 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.