Can any of the company-specific risk be diversified away by investing in both Via Renewables and Cinemark Holdings 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 Via Renewables and Cinemark Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Via Renewables and Cinemark Holdings, you can compare the effects of market volatilities on Via Renewables and Cinemark Holdings 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 Via Renewables with a short position of Cinemark Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Via Renewables and Cinemark Holdings.
Diversification Opportunities for Via Renewables and Cinemark Holdings
The 3 months correlation between Via and Cinemark is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Via Renewables and Cinemark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinemark Holdings and Via Renewables 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 Via Renewables are associated (or correlated) with Cinemark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinemark Holdings has no effect on the direction of Via Renewables i.e., Via Renewables and Cinemark Holdings go up and down completely randomly.
Pair Corralation between Via Renewables and Cinemark Holdings
Assuming the 90 days horizon Via Renewables is expected to generate 1.0 times more return on investment than Cinemark Holdings. However, Via Renewables is 1.0 times less risky than Cinemark Holdings. It trades about 0.17 of its potential returns per unit of risk. Cinemark Holdings is currently generating about 0.01 per unit of risk. If you would invest 1,867 in Via Renewables on March 6, 2024 and sell it today you would earn a total of 433.00 from holding Via Renewables or generate 23.19% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Cinemark Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cinemark Holdings is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.