Correlation Between Distribuidora and Transportadora

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

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

Diversification Opportunities for Distribuidora and Transportadora

0.69

Correlation Coefficient

Distribuidora  Transportadora

Poor diversification

The 3 months correlation between Distribuidora and Transportadora is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Distribuidora de Gas and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas and Distribuidora 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 Distribuidora de Gas are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Distribuidora i.e., Distribuidora and Transportadora go up and down completely randomly.

Pair Corralation between Distribuidora and Transportadora

Assuming the 90 days trading horizon Distribuidora de Gas is expected to generate 0.98 times more return on investment than Transportadora. However, Distribuidora de Gas is 1.02 times less risky than Transportadora. It trades about 0.05 of its potential returns per unit of risk. Transportadora de Gas is currently generating about -0.03 per unit of risk. If you would invest  131,500  in Distribuidora de Gas on April 25, 2025 and sell it today you would earn a total of  10,000  from holding Distribuidora de Gas or generate 7.6% return on investment over 90 days.

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

Distribuidora de Gas  vs.  Transportadora de Gas

Distribuidora de Gas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Distribuidora de Gas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Distribuidora may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Distribuidora and Transportadora

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

The idea behind Distribuidora de Gas and Transportadora de Gas 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.