Correlation Between Prime Securities and Inmobiliaria Colonial

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

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

Diversification Opportunities for Prime Securities and Inmobiliaria Colonial

-0.18

Correlation Coefficient

Prime Securities  Inmobiliaria Colonial

Good diversification

The 3 months correlation between Prime and Inmobiliaria is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Prime Securities Limited and Inmobiliaria Colonial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inmobiliaria Colonial and Prime Securities 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 Prime Securities Limited are associated (or correlated) with Inmobiliaria Colonial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inmobiliaria Colonial has no effect on the direction of Prime Securities i.e., Prime Securities and Inmobiliaria Colonial go up and down completely randomly.

Pair Corralation between Prime Securities and Inmobiliaria Colonial

Assuming the 90 days trading horizon Prime Securities Limited is expected to generate 1.07 times more return on investment than Inmobiliaria Colonial. However, Prime Securities is 1.07 times more volatile than Inmobiliaria Colonial SA. It trades about 0.08 of its potential returns per unit of risk. Inmobiliaria Colonial SA is currently generating about -0.02 per unit of risk. If you would invest  9,050  in Prime Securities Limited on February 7, 2024 and sell it today you would earn a total of  8,630  from holding Prime Securities Limited or generate 95.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.24%
Values	Daily Returns

Prime Securities Limited  vs.  Inmobiliaria Colonial SA

Prime Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Inmobiliaria Colonial

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Prime Securities and Inmobiliaria Colonial

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

The idea behind Prime Securities Limited and Inmobiliaria Colonial 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.