Correlation Between Compania and Molinos Juan

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

By analyzing existing cross correlation between Compania de Transporte and Molinos Juan Semino, you can compare the effects of market volatilities on Compania and Molinos Juan 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 Compania with a short position of Molinos Juan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Molinos Juan.

Diversification Opportunities for Compania and Molinos Juan

0.49

Correlation Coefficient

Compania  Molinos Juan

Very weak diversification

The 3 months correlation between Compania and Molinos is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Molinos Juan Semino in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molinos Juan Semino and Compania 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 Compania de Transporte are associated (or correlated) with Molinos Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molinos Juan Semino has no effect on the direction of Compania i.e., Compania and Molinos Juan go up and down completely randomly.

Pair Corralation between Compania and Molinos Juan

Assuming the 90 days trading horizon Compania de Transporte is expected to generate 0.82 times more return on investment than Molinos Juan. However, Compania de Transporte is 1.22 times less risky than Molinos Juan. It trades about 0.16 of its potential returns per unit of risk. Molinos Juan Semino is currently generating about 0.12 per unit of risk. If you would invest  184,500  in Compania de Transporte on September 13, 2024 and sell it today you would earn a total of  50,000  from holding Compania de Transporte or generate 27.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Compania de Transporte  vs.  Molinos Juan Semino

Compania de Transporte

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Molinos Juan Semino

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molinos Juan Semino are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Molinos Juan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Molinos Juan

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

The idea behind Compania de Transporte and Molinos Juan Semino 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.