Correlation Between Empresa Distribuidora and Pampa Energia

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

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

Diversification Opportunities for Empresa Distribuidora and Pampa Energia

0.93

Correlation Coefficient

Empresa Distribuidora  Pampa Energia

Almost no diversification

The 3 months correlation between Empresa and Pampa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Empresa Distribuidora 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 Empresa Distribuidora y are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Empresa Distribuidora i.e., Empresa Distribuidora and Pampa Energia go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and Pampa Energia

Considering the 90-day investment horizon Empresa Distribuidora y is expected to generate 1.49 times more return on investment than Pampa Energia. However, Empresa Distribuidora is 1.49 times more volatile than Pampa Energia SA. It trades about 0.43 of its potential returns per unit of risk. Pampa Energia SA is currently generating about 0.37 per unit of risk. If you would invest  1,884  in Empresa Distribuidora y on September 3, 2024 and sell it today you would earn a total of  2,114  from holding Empresa Distribuidora y or generate 112.21% return on investment over 90 days.

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

Empresa Distribuidora y  vs.  Pampa Energia SA

Empresa Distribuidora

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Pampa Energia SA

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Pampa Energia displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empresa Distribuidora and Pampa Energia

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

The idea behind Empresa Distribuidora y and Pampa Energia SA 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..