Correlation Between Avangrid and Central Puerto

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

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

Diversification Opportunities for Avangrid and Central Puerto

0.29

Correlation Coefficient

Avangrid  Central Puerto

Modest diversification

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

Pair Corralation between Avangrid and Central Puerto

Considering the 90-day investment horizon Avangrid is expected to generate 5.32 times less return on investment than Central Puerto. But when comparing it to its historical volatility, Avangrid is 6.19 times less risky than Central Puerto. It trades about 0.08 of its potential returns per unit of risk. Central Puerto SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  878.00  in Central Puerto SA on January 19, 2024 and sell it today you would earn a total of  35.00  from holding Central Puerto SA or generate 3.99% return on investment over 90 days.

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

Avangrid  vs.  Central Puerto SA

Avangrid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avangrid are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Avangrid reported solid returns over the last few months and may actually be approaching a breakup point.

Central Puerto SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Central Puerto is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Avangrid and Central Puerto

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

The idea behind Avangrid and Central Puerto SA 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.