Correlation Between Promotora and SPDR SP

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

By analyzing existing cross correlation between Promotora y Operadora and SPDR SP 500, you can compare the effects of market volatilities on Promotora and SPDR SP 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 Promotora with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and SPDR SP.

Diversification Opportunities for Promotora and SPDR SP

0.78

Correlation Coefficient

Promotora  SPDR SP

Poor diversification

The 3 months correlation between Promotora and SPDR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and Promotora 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 Promotora y Operadora are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Promotora i.e., Promotora and SPDR SP go up and down completely randomly.

Pair Corralation between Promotora and SPDR SP

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 1.61 times more return on investment than SPDR SP. However, Promotora is 1.61 times more volatile than SPDR SP 500. It trades about 0.06 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.06 per unit of risk. If you would invest  18,207  in Promotora y Operadora on July 2, 2024 and sell it today you would earn a total of  260.00  from holding Promotora y Operadora or generate 1.43% return on investment over 90 days.

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

Promotora y Operadora  vs.  SPDR SP 500

Promotora y Operadora

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Promotora may actually be approaching a critical reversion point that can send shares even higher in October 2024.

SPDR SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR SP may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Promotora and SPDR SP

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

The idea behind Promotora y Operadora and SPDR SP 500 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.