Correlation Between Orbia Advance and Arca Continental

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

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

Diversification Opportunities for Orbia Advance and Arca Continental

0.42

Correlation Coefficient

Orbia Advance  Arca Continental

Very weak diversification

The 3 months correlation between Orbia and Arca is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Orbia Advance and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and Orbia Advance 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 Orbia Advance are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Orbia Advance i.e., Orbia Advance and Arca Continental go up and down completely randomly.

Pair Corralation between Orbia Advance and Arca Continental

Assuming the 90 days trading horizon Orbia Advance is expected to under-perform the Arca Continental. In addition to that, Orbia Advance is 1.58 times more volatile than Arca Continental SAB. It trades about -0.08 of its total potential returns per unit of risk. Arca Continental SAB is currently generating about -0.03 per unit of volatility. If you would invest  17,749  in Arca Continental SAB on September 2, 2024 and sell it today you would lose (545.00) from holding Arca Continental SAB or give up 3.07% of portfolio value over 90 days.

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

Orbia Advance  vs.  Arca Continental SAB

Orbia Advance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbia Advance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orbia Advance and Arca Continental

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

The idea behind Orbia Advance and Arca Continental SAB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.