Correlation Between Talga Group and Industrias Penoles

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

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

Diversification Opportunities for Talga Group and Industrias Penoles

0.29

Correlation Coefficient

Talga Group  Industrias Penoles

Modest diversification

The 3 months correlation between Talga and Industrias is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Talga Group and Industrias Penoles Sab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Penoles Sab and Talga Group 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 Talga Group are associated (or correlated) with Industrias Penoles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Penoles Sab has no effect on the direction of Talga Group i.e., Talga Group and Industrias Penoles go up and down completely randomly.

Pair Corralation between Talga Group and Industrias Penoles

Assuming the 90 days horizon Talga Group is expected to generate 1.95 times more return on investment than Industrias Penoles. However, Talga Group is 1.95 times more volatile than Industrias Penoles Sab. It trades about 0.07 of its potential returns per unit of risk. Industrias Penoles Sab is currently generating about 0.05 per unit of risk. If you would invest  29.00  in Talga Group on September 2, 2024 and sell it today you would earn a total of  4.00  from holding Talga Group or generate 13.79% return on investment over 90 days.

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

Talga Group  vs.  Industrias Penoles Sab

Talga Group

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Talga Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Talga Group reported solid returns over the last few months and may actually be approaching a breakup point.

Industrias Penoles Sab

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Penoles Sab are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Industrias Penoles reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talga Group and Industrias Penoles

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

The idea behind Talga Group and Industrias Penoles 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.