Correlation Between Central Puerto and Garovaglio

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

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

Diversification Opportunities for Central Puerto and Garovaglio

0.21

Correlation Coefficient

Central Puerto  Garovaglio

Modest diversification

The 3 months correlation between Central and Garovaglio is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Garovaglio y Zorraquin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garovaglio y Zorraquin and Central Puerto 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 Central Puerto SA are associated (or correlated) with Garovaglio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garovaglio y Zorraquin has no effect on the direction of Central Puerto i.e., Central Puerto and Garovaglio go up and down completely randomly.

Pair Corralation between Central Puerto and Garovaglio

Assuming the 90 days trading horizon Central Puerto is expected to generate 1.15 times less return on investment than Garovaglio. But when comparing it to its historical volatility, Central Puerto SA is 1.64 times less risky than Garovaglio. It trades about 0.2 of its potential returns per unit of risk. Garovaglio y Zorraquin is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,500  in Garovaglio y Zorraquin on September 5, 2024 and sell it today you would earn a total of  5,075  from holding Garovaglio y Zorraquin or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Central Puerto SA  vs.  Garovaglio y Zorraquin

Central Puerto SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Puerto sustained solid returns over the last few months and may actually be approaching a breakup point.

Garovaglio y Zorraquin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garovaglio y Zorraquin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Garovaglio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Puerto and Garovaglio

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

The idea behind Central Puerto SA and Garovaglio y Zorraquin 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.