Correlation Between Empresa Nacional and Salfacorp

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

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

Diversification Opportunities for Empresa Nacional and Salfacorp

0.52

Correlation Coefficient

Empresa Nacional  Salfacorp

Very weak diversification

The 3 months correlation between Empresa and Salfacorp is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Nacional de and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and Empresa Nacional 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 Nacional de are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Empresa Nacional i.e., Empresa Nacional and Salfacorp go up and down completely randomly.

Pair Corralation between Empresa Nacional and Salfacorp

Assuming the 90 days trading horizon Empresa Nacional is expected to generate 1.03 times less return on investment than Salfacorp. In addition to that, Empresa Nacional is 1.1 times more volatile than Salfacorp. It trades about 0.04 of its total potential returns per unit of risk. Salfacorp is currently generating about 0.05 per unit of volatility. If you would invest  53,677  in Salfacorp on September 2, 2024 and sell it today you would earn a total of  1,823  from holding Salfacorp or generate 3.4% return on investment over 90 days.

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

Empresa Nacional de  vs.  Salfacorp

Empresa Nacional

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Nacional de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresa Nacional is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Salfacorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Salfacorp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Empresa Nacional and Salfacorp

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

The idea behind Empresa Nacional de and Salfacorp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.