Correlation Between Parq Arauco and Cuprum

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

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

Diversification Opportunities for Parq Arauco and Cuprum

-0.09

Correlation Coefficient

Parq Arauco  Cuprum

Good diversification

The 3 months correlation between Parq and Cuprum is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Parq Arauco and Cuprum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cuprum and Parq Arauco 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 Parq Arauco are associated (or correlated) with Cuprum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cuprum has no effect on the direction of Parq Arauco i.e., Parq Arauco and Cuprum go up and down completely randomly.

Pair Corralation between Parq Arauco and Cuprum

Assuming the 90 days trading horizon Parq Arauco is expected to generate 5.86 times less return on investment than Cuprum. But when comparing it to its historical volatility, Parq Arauco is 1.17 times less risky than Cuprum. It trades about 0.03 of its potential returns per unit of risk. Cuprum is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,051  in Cuprum on September 14, 2024 and sell it today you would earn a total of  628.00  from holding Cuprum or generate 12.43% return on investment over 90 days.

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

Parq Arauco  vs.  Cuprum

Parq Arauco

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parq Arauco are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Parq Arauco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cuprum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cuprum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Cuprum sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Parq Arauco and Cuprum

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

The idea behind Parq Arauco and Cuprum 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.