Correlation Between Carboclor and Pampa Energia

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

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

Diversification Opportunities for Carboclor and Pampa Energia

0.83

Correlation Coefficient

Carboclor  Pampa Energia

Very poor diversification

The 3 months correlation between Carboclor and Pampa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Carboclor and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Carboclor 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 Carboclor are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Carboclor i.e., Carboclor and Pampa Energia go up and down completely randomly.

Pair Corralation between Carboclor and Pampa Energia

Assuming the 90 days trading horizon Carboclor is expected to under-perform the Pampa Energia. In addition to that, Carboclor is 1.14 times more volatile than Pampa Energia SA. It trades about -0.13 of its total potential returns per unit of risk. Pampa Energia SA is currently generating about 0.18 per unit of volatility. If you would invest  388,000  in Pampa Energia SA on October 1, 2024 and sell it today you would earn a total of  31,000  from holding Pampa Energia SA or generate 7.99% return on investment over 90 days.

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

Carboclor  vs.  Pampa Energia SA

Carboclor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carboclor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carboclor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pampa Energia SA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pampa Energia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carboclor and Pampa Energia

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

The idea behind Carboclor and Pampa Energia 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.