Correlation Between Socovesa and Besalco Sa

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

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

Diversification Opportunities for Socovesa and Besalco Sa

0.57

Correlation Coefficient

Socovesa  Besalco Sa

Very weak diversification

The 3 months correlation between Socovesa and Besalco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Socovesa and Besalco Sa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Besalco Sa and Socovesa 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 Socovesa are associated (or correlated) with Besalco Sa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Besalco Sa has no effect on the direction of Socovesa i.e., Socovesa and Besalco Sa go up and down completely randomly.

Pair Corralation between Socovesa and Besalco Sa

Assuming the 90 days trading horizon Socovesa is expected to under-perform the Besalco Sa. In addition to that, Socovesa is 1.58 times more volatile than Besalco Sa. It trades about -0.04 of its total potential returns per unit of risk. Besalco Sa is currently generating about 0.13 per unit of volatility. If you would invest  41,276  in Besalco Sa on September 6, 2024 and sell it today you would earn a total of  15,307  from holding Besalco Sa or generate 37.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.72%
Values	Daily Returns

Socovesa  vs.  Besalco Sa

Socovesa

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Socovesa are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Socovesa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Besalco Sa

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Besalco Sa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Besalco Sa is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Socovesa and Besalco Sa

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

The idea behind Socovesa and Besalco 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..