Correlation Between Vidrala SA and Linea Directa

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

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

Diversification Opportunities for Vidrala SA and Linea Directa

0.38

Correlation Coefficient

Vidrala SA  Linea Directa

Weak diversification

The 3 months correlation between Vidrala and Linea is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vidrala 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 Vidrala SA 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 Vidrala 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 Vidrala SA i.e., Vidrala SA and Linea Directa go up and down completely randomly.

Pair Corralation between Vidrala SA and Linea Directa

Assuming the 90 days trading horizon Vidrala SA is expected to generate 5.72 times less return on investment than Linea Directa. But when comparing it to its historical volatility, Vidrala SA is 1.59 times less risky than Linea Directa. It trades about 0.04 of its potential returns per unit of risk. 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 Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Vidrala SA  vs.  Linea Directa Aseguradora

Vidrala SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vidrala SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Vidrala SA 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 Vidrala SA and Linea Directa

The main advantage of trading using opposite Vidrala SA and Linea Directa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vidrala SA 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 Vidrala 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.