Correlation Between Cementos Pacasmayo and ECD Automotive

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

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

Diversification Opportunities for Cementos Pacasmayo and ECD Automotive

-0.47

Correlation Coefficient

Cementos Pacasmayo  ECD Automotive

Very good diversification

The 3 months correlation between Cementos and ECD is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and ECD Automotive go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and ECD Automotive

Given the investment horizon of 90 days Cementos Pacasmayo SAA is expected to under-perform the ECD Automotive. But the stock apears to be less risky and, when comparing its historical volatility, Cementos Pacasmayo SAA is 3.55 times less risky than ECD Automotive. The stock trades about -0.08 of its potential returns per unit of risk. The ECD Automotive Design is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  89.00  in ECD Automotive Design on February 28, 2024 and sell it today you would earn a total of  26.00  from holding ECD Automotive Design or generate 29.21% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  ECD Automotive Design

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.

ECD Automotive Design

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ECD Automotive Design are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, ECD Automotive sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cementos Pacasmayo and ECD Automotive

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

The idea behind Cementos Pacasmayo SAA and ECD Automotive Design 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.