Correlation Between Cementos Pacasmayo and 70082LAB3

Can any of the company-specific risk be diversified away by investing in both Cementos Pacasmayo and 70082LAB3 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 Cementos Pacasmayo and 70082LAB3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cementos Pacasmayo SAA and US70082LAB36, you can compare the effects of market volatilities on Cementos Pacasmayo and 70082LAB3 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 Cementos Pacasmayo with a short position of 70082LAB3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cementos Pacasmayo and 70082LAB3.

Diversification Opportunities for Cementos Pacasmayo and 70082LAB3

0.79

Correlation Coefficient

Cementos Pacasmayo  70082LAB3

Poor diversification

The 3 months correlation between Cementos and 70082LAB3 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and US70082LAB36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US70082LAB36 and Cementos Pacasmayo 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 Cementos Pacasmayo SAA are associated (or correlated) with 70082LAB3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US70082LAB36 has no effect on the direction of Cementos Pacasmayo i.e., Cementos Pacasmayo and 70082LAB3 go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and 70082LAB3

Given the investment horizon of 90 days Cementos Pacasmayo SAA is expected to under-perform the 70082LAB3. But the stock apears to be less risky and, when comparing its historical volatility, Cementos Pacasmayo SAA is 2.02 times less risky than 70082LAB3. The stock trades about -0.02 of its potential returns per unit of risk. The US70082LAB36 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,830  in US70082LAB36 on January 25, 2025 and sell it today you would lose (380.00) from holding US70082LAB36 or give up 4.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	61.29%
Values	Daily Returns

Cementos Pacasmayo SAA  vs.  US70082LAB36

Cementos Pacasmayo SAA

Risk-Adjusted Performance

Very Weak

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

US70082LAB36

Risk-Adjusted Performance

Very Weak

Over the last 90 days US70082LAB36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 70082LAB3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cementos Pacasmayo and 70082LAB3

The main advantage of trading using opposite Cementos Pacasmayo and 70082LAB3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cementos Pacasmayo position performs unexpectedly, 70082LAB3 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 70082LAB3 will offset losses from the drop in 70082LAB3's long position.

The idea behind Cementos Pacasmayo SAA and US70082LAB36 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.