Correlation Between Inmobiliaria Colonial and Neinor Homes

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

By analyzing existing cross correlation between Inmobiliaria Colonial SA and Neinor Homes SLU, you can compare the effects of market volatilities on Inmobiliaria Colonial and Neinor Homes 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 Inmobiliaria Colonial with a short position of Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inmobiliaria Colonial and Neinor Homes.

Diversification Opportunities for Inmobiliaria Colonial and Neinor Homes

0.14

Correlation Coefficient

Inmobiliaria Colonial  Neinor Homes

Average diversification

The 3 months correlation between Inmobiliaria and Neinor is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Inmobiliaria Colonial SA and Neinor Homes SLU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SLU and Inmobiliaria Colonial 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 Inmobiliaria Colonial SA are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SLU has no effect on the direction of Inmobiliaria Colonial i.e., Inmobiliaria Colonial and Neinor Homes go up and down completely randomly.

Pair Corralation between Inmobiliaria Colonial and Neinor Homes

Assuming the 90 days trading horizon Inmobiliaria Colonial SA is expected to generate 0.94 times more return on investment than Neinor Homes. However, Inmobiliaria Colonial SA is 1.06 times less risky than Neinor Homes. It trades about 0.18 of its potential returns per unit of risk. Neinor Homes SLU is currently generating about 0.08 per unit of risk. If you would invest  528.00  in Inmobiliaria Colonial SA on January 30, 2024 and sell it today you would earn a total of  28.00  from holding Inmobiliaria Colonial SA or generate 5.3% return on investment over 90 days.

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

Inmobiliaria Colonial SA  vs.  Neinor Homes SLU

Inmobiliaria Colonial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Neinor Homes SLU

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SLU are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Neinor Homes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Inmobiliaria Colonial and Neinor Homes

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

The idea behind Inmobiliaria Colonial SA and Neinor Homes SLU 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.