Correlation Between Loma Negra and Cementos Pacasmayo

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

By analyzing existing cross correlation between Loma Negra Compania and Cementos Pacasmayo SAA, you can compare the effects of market volatilities on Loma Negra and Cementos Pacasmayo 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 Loma Negra with a short position of Cementos Pacasmayo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loma Negra and Cementos Pacasmayo.

Diversification Opportunities for Loma Negra and Cementos Pacasmayo

-0.27

Correlation Coefficient

Loma Negra  Cementos Pacasmayo

Very good diversification

The 3 months correlation between Loma and Cementos is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Loma Negra Compania and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA and Loma Negra 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 Loma Negra Compania are associated (or correlated) with Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Loma Negra i.e., Loma Negra and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Loma Negra and Cementos Pacasmayo

Given the investment horizon of 90 days Loma Negra Compania is expected to generate 1.34 times more return on investment than Cementos Pacasmayo. However, Loma Negra is 1.34 times more volatile than Cementos Pacasmayo SAA. It trades about 0.06 of its potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about 0.0 per unit of risk. If you would invest  640.00  in Loma Negra Compania on February 28, 2024 and sell it today you would earn a total of  53.00  from holding Loma Negra Compania or generate 8.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Loma Negra Compania  vs.  Cementos Pacasmayo SAA

Loma Negra Compania

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Loma Negra Compania are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Loma Negra may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cementos Pacasmayo SAA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Loma Negra and Cementos Pacasmayo

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

The idea behind Loma Negra Compania and Cementos Pacasmayo SAA 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.