Correlation Between Old Republic and Corporacion America

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

By analyzing existing cross correlation between Old Republic International and Corporacion America Airports, you can compare the effects of market volatilities on Old Republic and Corporacion America 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 Old Republic with a short position of Corporacion America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Corporacion America.

Diversification Opportunities for Old Republic and Corporacion America

0.39

Correlation Coefficient

Old Republic  Corporacion America

Weak diversification

The 3 months correlation between Old and Corporacion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Corporacion America Airports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporacion America and Old Republic 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 Old Republic International are associated (or correlated) with Corporacion America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporacion America has no effect on the direction of Old Republic i.e., Old Republic and Corporacion America go up and down completely randomly.

Pair Corralation between Old Republic and Corporacion America

Considering the 90-day investment horizon Old Republic is expected to generate 3.34 times less return on investment than Corporacion America. But when comparing it to its historical volatility, Old Republic International is 1.91 times less risky than Corporacion America. It trades about 0.08 of its potential returns per unit of risk. Corporacion America Airports is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,665  in Corporacion America Airports on September 12, 2024 and sell it today you would earn a total of  364.00  from holding Corporacion America Airports or generate 21.86% return on investment over 90 days.

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

Old Republic International  vs.  Corporacion America Airports

Old Republic Interna

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Corporacion America

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Republic and Corporacion America

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

The idea behind Old Republic International and Corporacion America Airports 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.