Correlation Between Cementos Pacasmayo and Small Cap

Can any of the company-specific risk be diversified away by investing in both Cementos Pacasmayo and Small Cap 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 Small Cap 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 Small Cap Premium, you can compare the effects of market volatilities on Cementos Pacasmayo and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cementos Pacasmayo and Small Cap.

Diversification Opportunities for Cementos Pacasmayo and Small Cap

0.8

Correlation Coefficient

Cementos Pacasmayo  Small Cap

Very poor diversification

The 3 months correlation between Cementos and Small is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and Small Cap go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Small Cap

Given the investment horizon of 90 days Cementos Pacasmayo SAA is expected to generate 3.35 times more return on investment than Small Cap. However, Cementos Pacasmayo is 3.35 times more volatile than Small Cap Premium. It trades about 0.13 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.06 per unit of risk. If you would invest  521.00  in Cementos Pacasmayo SAA on September 20, 2024 and sell it today you would earn a total of  70.00  from holding Cementos Pacasmayo SAA or generate 13.44% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  Small Cap Premium

Cementos Pacasmayo SAA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Cementos Pacasmayo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Premium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cementos Pacasmayo and Small Cap

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

The idea behind Cementos Pacasmayo SAA and Small Cap Premium 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.