Correlation Between Central Puerto and XWC

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Can any of the company-specific risk be diversified away by investing in both Central Puerto and XWC 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 Central Puerto and XWC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Puerto and XWC, you can compare the effects of market volatilities on Central Puerto and XWC 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 Central Puerto with a short position of XWC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Puerto and XWC.

Diversification Opportunities for Central Puerto and XWC

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Central and XWC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC and Central Puerto 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 Central Puerto are associated (or correlated) with XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Central Puerto i.e., Central Puerto and XWC go up and down completely randomly.

Pair Corralation between Central Puerto and XWC

Given the investment horizon of 90 days Central Puerto is expected to generate 13.35 times less return on investment than XWC. But when comparing it to its historical volatility, Central Puerto is 19.61 times less risky than XWC. It trades about 0.08 of its potential returns per unit of risk. XWC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  87.00  in XWC on September 9, 2022 and sell it today you would lose (83.63)  from holding XWC or give up 96.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy96.51%
ValuesDaily Returns

Central Puerto  vs.  XWC

 Performance (%) 
       Timeline  
Central Puerto 
Central Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Central Puerto may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Central Price Channel

XWC 
XWC Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XWC sustained solid returns over the last few months and may actually be approaching a breakup point.

XWC Price Channel

Central Puerto and XWC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Central Puerto and XWC

The main advantage of trading using opposite Central Puerto and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.
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The idea behind Central Puerto and XWC 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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