Correlation Between Parq Arauco and Eche Izquierdo

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

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

Diversification Opportunities for Parq Arauco and Eche Izquierdo

-0.14

Correlation Coefficient

Parq Arauco  Eche Izquierdo

Good diversification

The 3 months correlation between Parq and Eche is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Parq Arauco and Eche Izquierdo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eche Izquierdo 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 Eche Izquierdo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eche Izquierdo has no effect on the direction of Parq Arauco i.e., Parq Arauco and Eche Izquierdo go up and down completely randomly.

Pair Corralation between Parq Arauco and Eche Izquierdo

Assuming the 90 days trading horizon Parq Arauco is expected to generate 1.29 times more return on investment than Eche Izquierdo. However, Parq Arauco is 1.29 times more volatile than Eche Izquierdo. It trades about 0.05 of its potential returns per unit of risk. Eche Izquierdo is currently generating about 0.05 per unit of risk. If you would invest  151,500  in Parq Arauco on August 31, 2024 and sell it today you would earn a total of  4,600  from holding Parq Arauco or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.63%
Values	Daily Returns

Parq Arauco  vs.  Eche Izquierdo

Parq Arauco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parq Arauco are ranked lower than 3 (%) 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.

Eche Izquierdo

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eche Izquierdo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Eche Izquierdo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Parq Arauco and Eche Izquierdo

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

The idea behind Parq Arauco and Eche Izquierdo 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.