Correlation Between Carmila SA and Altarea SCA

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

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

Diversification Opportunities for Carmila SA and Altarea SCA

0.28

Correlation Coefficient

Carmila SA  Altarea SCA

Modest diversification

The 3 months correlation between Carmila and Altarea is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Carmila SA and Altarea SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altarea SCA and Carmila SA 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 Carmila SA are associated (or correlated) with Altarea SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altarea SCA has no effect on the direction of Carmila SA i.e., Carmila SA and Altarea SCA go up and down completely randomly.

Pair Corralation between Carmila SA and Altarea SCA

Assuming the 90 days trading horizon Carmila SA is expected to generate 0.63 times more return on investment than Altarea SCA. However, Carmila SA is 1.58 times less risky than Altarea SCA. It trades about -0.04 of its potential returns per unit of risk. Altarea SCA is currently generating about -0.04 per unit of risk. If you would invest  1,700  in Carmila SA on August 31, 2024 and sell it today you would lose (50.00) from holding Carmila SA or give up 2.94% of portfolio value over 90 days.

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

Carmila SA  vs.  Altarea SCA

Carmila SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Altarea SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Carmila SA and Altarea SCA

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

The idea behind Carmila SA and Altarea SCA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.