Correlation Between Construcciones and Azkoyen

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

By analyzing existing cross correlation between Construcciones y Auxiliar and Azkoyen, you can compare the effects of market volatilities on Construcciones and Azkoyen 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 Construcciones with a short position of Azkoyen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construcciones and Azkoyen.

Diversification Opportunities for Construcciones and Azkoyen

0.59

Correlation Coefficient

Construcciones  Azkoyen

Very weak diversification

The 3 months correlation between Construcciones and Azkoyen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Construcciones y Auxiliar and Azkoyen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azkoyen and Construcciones 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 Construcciones y Auxiliar are associated (or correlated) with Azkoyen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azkoyen has no effect on the direction of Construcciones i.e., Construcciones and Azkoyen go up and down completely randomly.

Pair Corralation between Construcciones and Azkoyen

Assuming the 90 days trading horizon Construcciones y Auxiliar is expected to generate 1.28 times more return on investment than Azkoyen. However, Construcciones is 1.28 times more volatile than Azkoyen. It trades about 0.01 of its potential returns per unit of risk. Azkoyen is currently generating about -0.03 per unit of risk. If you would invest  3,405  in Construcciones y Auxiliar on September 13, 2024 and sell it today you would earn a total of  15.00  from holding Construcciones y Auxiliar or generate 0.44% return on investment over 90 days.

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

Construcciones y Auxiliar  vs.  Azkoyen

Construcciones y Auxiliar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Azkoyen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Construcciones and Azkoyen

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

The idea behind Construcciones y Auxiliar and Azkoyen 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..