Correlation Between Aluar Aluminio and Agrometal SAI

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

By analyzing existing cross correlation between Aluar Aluminio Argentino and Agrometal SAI, you can compare the effects of market volatilities on Aluar Aluminio and Agrometal SAI 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 Aluar Aluminio with a short position of Agrometal SAI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluar Aluminio and Agrometal SAI.

Diversification Opportunities for Aluar Aluminio and Agrometal SAI

0.68

Correlation Coefficient

Aluar Aluminio  Agrometal SAI

Poor diversification

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

Pair Corralation between Aluar Aluminio and Agrometal SAI

Assuming the 90 days trading horizon Aluar Aluminio Argentino is expected to under-perform the Agrometal SAI. But the stock apears to be less risky and, when comparing its historical volatility, Aluar Aluminio Argentino is 1.39 times less risky than Agrometal SAI. The stock trades about -0.01 of its potential returns per unit of risk. The Agrometal SAI is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,690  in Agrometal SAI on September 13, 2024 and sell it today you would earn a total of  1,640  from holding Agrometal SAI or generate 28.82% return on investment over 90 days.

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

Aluar Aluminio Argentino  vs.  Agrometal SAI

Aluar Aluminio Argentino

Risk-Adjusted Performance

0 of 100

Very Weak

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

Agrometal SAI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agrometal SAI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluar Aluminio and Agrometal SAI

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

The idea behind Aluar Aluminio Argentino and Agrometal SAI 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.