Correlation Between San Miguel and Molinos Agro

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

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

Diversification Opportunities for San Miguel and Molinos Agro

0.88

Correlation Coefficient

San Miguel  Molinos Agro

Very poor diversification

The 3 months correlation between San and Molinos is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel AG and Molinos Agro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molinos Agro SA and San Miguel 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 San Miguel AG are associated (or correlated) with Molinos Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molinos Agro SA has no effect on the direction of San Miguel i.e., San Miguel and Molinos Agro go up and down completely randomly.

Pair Corralation between San Miguel and Molinos Agro

Assuming the 90 days trading horizon San Miguel AG is expected to under-perform the Molinos Agro. But the stock apears to be less risky and, when comparing its historical volatility, San Miguel AG is 1.01 times less risky than Molinos Agro. The stock trades about -0.11 of its potential returns per unit of risk. The Molinos Agro SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,057,450  in Molinos Agro SA on February 11, 2024 and sell it today you would lose (144,300) from holding Molinos Agro SA or give up 7.01% of portfolio value over 90 days.

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

San Miguel AG  vs.  Molinos Agro SA

San Miguel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Miguel AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Molinos Agro SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molinos Agro SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with San Miguel and Molinos Agro

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

The idea behind San Miguel AG and Molinos Agro 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.