Correlation Between Agrometal SAI and Transportadora

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

By analyzing existing cross correlation between Agrometal SAI and Transportadora de Gas, you can compare the effects of market volatilities on Agrometal SAI and Transportadora 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 Agrometal SAI with a short position of Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agrometal SAI and Transportadora.

Diversification Opportunities for Agrometal SAI and Transportadora

0.27

Correlation Coefficient

Agrometal SAI  Transportadora

Modest diversification

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

Pair Corralation between Agrometal SAI and Transportadora

Assuming the 90 days trading horizon Agrometal SAI is expected to generate 1.83 times less return on investment than Transportadora. In addition to that, Agrometal SAI is 1.45 times more volatile than Transportadora de Gas. It trades about 0.05 of its total potential returns per unit of risk. Transportadora de Gas is currently generating about 0.14 per unit of volatility. If you would invest  47,480  in Transportadora de Gas on June 23, 2024 and sell it today you would earn a total of  455,520  from holding Transportadora de Gas or generate 959.39% return on investment over 90 days.

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

Agrometal SAI  vs.  Transportadora de Gas

Agrometal SAI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agrometal SAI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Transportadora de Gas

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agrometal SAI and Transportadora

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

The idea behind Agrometal SAI and Transportadora de Gas 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.