Correlation Between Administradora Americana and Empresas Lipigas

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

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

Diversification Opportunities for Administradora Americana and Empresas Lipigas

-0.46

Correlation Coefficient

Administradora Americana  Empresas Lipigas

Very good diversification

The 3 months correlation between Administradora and Empresas is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Administradora Americana de and Empresas Lipigas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresas Lipigas and Administradora Americana 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 Administradora Americana de are associated (or correlated) with Empresas Lipigas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresas Lipigas has no effect on the direction of Administradora Americana i.e., Administradora Americana and Empresas Lipigas go up and down completely randomly.

Pair Corralation between Administradora Americana and Empresas Lipigas

Assuming the 90 days trading horizon Administradora Americana de is expected to under-perform the Empresas Lipigas. But the stock apears to be less risky and, when comparing its historical volatility, Administradora Americana de is 3.51 times less risky than Empresas Lipigas. The stock trades about -0.29 of its potential returns per unit of risk. The Empresas Lipigas SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  359,881  in Empresas Lipigas SA on February 3, 2024 and sell it today you would earn a total of  2,599  from holding Empresas Lipigas SA or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Administradora Americana de  vs.  Empresas Lipigas SA

Administradora Americana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Administradora Americana de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Administradora Americana is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Empresas Lipigas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empresas Lipigas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Empresas Lipigas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Administradora Americana and Empresas Lipigas

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

The idea behind Administradora Americana de and Empresas Lipigas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.