Correlation Between Metrogas and Capex SA

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

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

Diversification Opportunities for Metrogas and Capex SA

0.83

Correlation Coefficient

Metrogas  Capex SA

Very poor diversification

The 3 months correlation between Metrogas and Capex is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Metrogas SA and Capex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capex SA and Metrogas 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 Metrogas SA are associated (or correlated) with Capex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capex SA has no effect on the direction of Metrogas i.e., Metrogas and Capex SA go up and down completely randomly.

Pair Corralation between Metrogas and Capex SA

Assuming the 90 days trading horizon Metrogas SA is expected to generate 0.98 times more return on investment than Capex SA. However, Metrogas SA is 1.02 times less risky than Capex SA. It trades about 0.45 of its potential returns per unit of risk. Capex SA is currently generating about 0.15 per unit of risk. If you would invest  124,000  in Metrogas SA on September 13, 2024 and sell it today you would earn a total of  164,500  from holding Metrogas SA or generate 132.66% return on investment over 90 days.

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

Metrogas SA  vs.  Capex SA

Metrogas SA

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metrogas SA are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Metrogas sustained solid returns over the last few months and may actually be approaching a breakup point.

Capex SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capex SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capex SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metrogas and Capex SA

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

The idea behind Metrogas SA and Capex 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.