Correlation Between NewMarket and Sociedad Quimica

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

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

Diversification Opportunities for NewMarket and Sociedad Quimica

-0.51

Correlation Coefficient

NewMarket  Sociedad Quimica

Excellent diversification

The 3 months correlation between NewMarket and Sociedad is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding NewMarket and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y and NewMarket 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 NewMarket are associated (or correlated) with Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of NewMarket i.e., NewMarket and Sociedad Quimica go up and down completely randomly.

Pair Corralation between NewMarket and Sociedad Quimica

Considering the 90-day investment horizon NewMarket is expected to under-perform the Sociedad Quimica. But the stock apears to be less risky and, when comparing its historical volatility, NewMarket is 1.66 times less risky than Sociedad Quimica. The stock trades about -0.04 of its potential returns per unit of risk. The Sociedad Quimica y is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,880  in Sociedad Quimica y on August 30, 2024 and sell it today you would lose (24.00) from holding Sociedad Quimica y or give up 0.62% of portfolio value over 90 days.

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

NewMarket  vs.  Sociedad Quimica y

NewMarket

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewMarket has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, NewMarket is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sociedad Quimica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sociedad Quimica is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NewMarket and Sociedad Quimica

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

The idea behind NewMarket and Sociedad Quimica y 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.