Correlation Between Cementos Pacasmayo and Monarch Cement

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

By analyzing existing cross correlation between Cementos Pacasmayo SAA and The Monarch Cement, you can compare the effects of market volatilities on Cementos Pacasmayo and Monarch Cement 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 Cementos Pacasmayo with a short position of Monarch Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cementos Pacasmayo and Monarch Cement.

Diversification Opportunities for Cementos Pacasmayo and Monarch Cement

0.5

Correlation Coefficient

Cementos Pacasmayo  Monarch Cement

Very weak diversification

The 3 months correlation between Cementos and Monarch is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and The Monarch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Cement and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with Monarch Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Cement has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and Monarch Cement go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Monarch Cement

Given the investment horizon of 90 days Cementos Pacasmayo is expected to generate 4.58 times less return on investment than Monarch Cement. But when comparing it to its historical volatility, Cementos Pacasmayo SAA is 1.09 times less risky than Monarch Cement. It trades about 0.03 of its potential returns per unit of risk. The Monarch Cement is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  18,276  in The Monarch Cement on September 2, 2024 and sell it today you would earn a total of  3,574  from holding The Monarch Cement or generate 19.56% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  The Monarch Cement

Cementos Pacasmayo SAA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Monarch Cement

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Monarch Cement are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Monarch Cement displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cementos Pacasmayo and Monarch Cement

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

The idea behind Cementos Pacasmayo SAA and The Monarch Cement 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..