The correlation between two variables



The correlation between two variables tells us that there is a linear and proportional relationship between the two, which makes the values of one move depending on the values of the other. It is not necessary that there is a causality between the two.

In this sense, we have seen losses in risky financial assets (Stock Market, Fixed Income Positions of companies) when we have negative news. Sometimes even other interest rate assets that are normally havens act correlated to these movements.

For this reason we like the so-called Alternative Investments, which are those that have no correlation with the financial markets.

Within the Alternative investments, there are those that are subject to the economic cycles because they are linked to a particular business, with which the risk of the economic cycle does not sufficiently decorrelate the results of the investment.

If we really want alternative investments, which are hardly affected by stock markets, bonds, foreign exchange interest rates, the economic cycle, etc., that is, real and effective decorrelation, we have to look much further.

Every day alternative investments have more weight in investors’ portfolios, and in the future they will have more.

Who does not want to have an investment that is profitable regardless of whether the stock market goes up or down, rates, economic cycle, currencies, etc?

We see more and more investors request alternative investments of different types, which are really uncorrelated with the behavior of the markets.

Mathematical algorithms can very well fulfill this function of decorrelation between risk investments (stock market, credit assets, interest rates) since they use quantitative tools for management.

Many times the human factor is eliminated, and it is “the machine” that takes the positions, with which the optimization margin is maximum.

But not all algorithms are the same, because for them to truly be a decorrelated alternative investment, their correlation levels with the different financial and economic assets must be calculated. The important thing about alternative investments is that they have constant positive returns based on the risk they take, and that they don’t look like any other investment (true decorrelation).

In our case, we like this type of algorithm, of which we have already tested 2 different ones with continuous success, regardless of whether the markets rise or fall, the economic cycle is growth or recession, etc.

Another great advantage of using these investments is the immediate liquidity of the investment and being able to automatically recover the money without any penalty.

Now that is decorrelation with net returns of 20% per year. Does anyone give more?

Interested in learning more about Adapta Socios?


Reacciones de los mercados esta semana

Market reactions this week

Market reaction to possible ceasefire between Russia and Ukraine. The rumor of an agreement in the war improves the mood of the markets and the indices manage to recover 50% of the annual fall.


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