Correlation Between North American and POLENERGIA

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

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

Diversification Opportunities for North American and POLENERGIA

-0.47

Correlation Coefficient

North American  POLENERGIA

Very good diversification

The 3 months correlation between North and POLENERGIA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and POLENERGIA SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POLENERGIA SA ZY and North American 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 North American Construction are associated (or correlated) with POLENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POLENERGIA SA ZY has no effect on the direction of North American i.e., North American and POLENERGIA go up and down completely randomly.

Pair Corralation between North American and POLENERGIA

Assuming the 90 days horizon North American Construction is expected to generate 1.5 times more return on investment than POLENERGIA. However, North American is 1.5 times more volatile than POLENERGIA SA ZY. It trades about 0.12 of its potential returns per unit of risk. POLENERGIA SA ZY is currently generating about 0.01 per unit of risk. If you would invest  1,590  in North American Construction on September 27, 2024 and sell it today you would earn a total of  340.00  from holding North American Construction or generate 21.38% return on investment over 90 days.

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

North American Construction  vs.  POLENERGIA SA ZY

North American Const

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

POLENERGIA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days POLENERGIA SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, POLENERGIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with North American and POLENERGIA

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

The idea behind North American Construction and POLENERGIA SA ZY 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.