Correlation Between Energia Latina and AFP Capital

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

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

Diversification Opportunities for Energia Latina and AFP Capital

0.88

Correlation Coefficient

Energia Latina  AFP Capital

Very poor diversification

The 3 months correlation between Energia and AFP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Energia Latina SA and AFP Capital SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFP Capital SA and Energia Latina 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 Energia Latina SA are associated (or correlated) with AFP Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFP Capital SA has no effect on the direction of Energia Latina i.e., Energia Latina and AFP Capital go up and down completely randomly.

Pair Corralation between Energia Latina and AFP Capital

If you would invest  90,000  in Energia Latina SA on August 31, 2024 and sell it today you would earn a total of  3,500  from holding Energia Latina SA or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	18.64%
Values	Daily Returns

Energia Latina SA  vs.  AFP Capital SA

Energia Latina SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energia Latina SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Energia Latina is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AFP Capital SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFP Capital SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, AFP Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Energia Latina and AFP Capital

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

The idea behind Energia Latina SA and AFP Capital 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.