Correlation Between Realia and Promotora

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

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

Diversification Opportunities for Realia and Promotora

-0.75

Correlation Coefficient

Realia  Promotora

Pay attention - limited upside

The 3 months correlation between Realia and Promotora is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Realia and Promotora de Informaciones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promotora de Informa and Realia 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 Realia are associated (or correlated) with Promotora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promotora de Informa has no effect on the direction of Realia i.e., Realia and Promotora go up and down completely randomly.

Pair Corralation between Realia and Promotora

Assuming the 90 days trading horizon Realia is expected to under-perform the Promotora. But the stock apears to be less risky and, when comparing its historical volatility, Realia is 1.49 times less risky than Promotora. The stock trades about -0.07 of its potential returns per unit of risk. The Promotora de Informaciones is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Promotora de Informaciones on March 29, 2024 and sell it today you would earn a total of  0.00  from holding Promotora de Informaciones or generate 0.0% return on investment over 90 days.

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

Realia  vs.  Promotora de Informaciones

Realia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Realia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Promotora de Informa

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora de Informaciones are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Promotora may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Realia and Promotora

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

The idea behind Realia and Promotora de Informaciones 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.