Correlation Between Redeia Corporacion and Linea Directa

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

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

Diversification Opportunities for Redeia Corporacion and Linea Directa

-0.57

Correlation Coefficient

Redeia Corporacion  Linea Directa

Excellent diversification

The 3 months correlation between Redeia and Linea is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Redeia Corporacion SA and Linea Directa Aseguradora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linea Directa Aseguradora and Redeia Corporacion 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 Redeia Corporacion SA are associated (or correlated) with Linea Directa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linea Directa Aseguradora has no effect on the direction of Redeia Corporacion i.e., Redeia Corporacion and Linea Directa go up and down completely randomly.

Pair Corralation between Redeia Corporacion and Linea Directa

Assuming the 90 days trading horizon Redeia Corporacion SA is expected to under-perform the Linea Directa. But the stock apears to be less risky and, when comparing its historical volatility, Redeia Corporacion SA is 1.55 times less risky than Linea Directa. The stock trades about -0.07 of its potential returns per unit of risk. The Linea Directa Aseguradora is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  116.00  in Linea Directa Aseguradora on April 20, 2025 and sell it today you would earn a total of  19.00  from holding Linea Directa Aseguradora or generate 16.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Redeia Corporacion SA  vs.  Linea Directa Aseguradora

Redeia Corporacion

Risk-Adjusted Performance

Very Weak

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

Linea Directa Aseguradora

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Linea Directa Aseguradora are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Linea Directa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Redeia Corporacion and Linea Directa

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

The idea behind Redeia Corporacion SA and Linea Directa Aseguradora 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.