Correlation Between Metrogas and QUALCOMM Incorporated

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

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

Diversification Opportunities for Metrogas and QUALCOMM Incorporated

-0.46

Correlation Coefficient

Metrogas  QUALCOMM Incorporated

Very good diversification

The 3 months correlation between Metrogas and QUALCOMM is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Metrogas SA and QUALCOMM Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALCOMM Incorporated 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 QUALCOMM Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALCOMM Incorporated has no effect on the direction of Metrogas i.e., Metrogas and QUALCOMM Incorporated go up and down completely randomly.

Pair Corralation between Metrogas and QUALCOMM Incorporated

Assuming the 90 days trading horizon Metrogas SA is expected to generate 1.13 times more return on investment than QUALCOMM Incorporated. However, Metrogas is 1.13 times more volatile than QUALCOMM Incorporated. It trades about 0.44 of its potential returns per unit of risk. QUALCOMM Incorporated is currently generating about 0.02 per unit of risk. If you would invest  117,000  in Metrogas SA on September 5, 2024 and sell it today you would earn a total of  153,000  from holding Metrogas SA or generate 130.77% return on investment over 90 days.

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

Metrogas SA  vs.  QUALCOMM Incorporated

Metrogas SA

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metrogas SA are ranked lower than 34 (%) 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.

QUALCOMM Incorporated

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QUALCOMM Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, QUALCOMM Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metrogas and QUALCOMM Incorporated

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

The idea behind Metrogas SA and QUALCOMM Incorporated 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.