Correlation Between AFP Capital and Falabella

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

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

Diversification Opportunities for AFP Capital and Falabella

0.62

Correlation Coefficient

AFP Capital  Falabella

Poor diversification

The 3 months correlation between AFP and Falabella is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding AFP Capital SA and Falabella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falabella and AFP Capital 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 AFP Capital SA are associated (or correlated) with Falabella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falabella has no effect on the direction of AFP Capital i.e., AFP Capital and Falabella go up and down completely randomly.

Pair Corralation between AFP Capital and Falabella

If you would invest  322,200  in Falabella on August 31, 2024 and sell it today you would earn a total of  12,000  from holding Falabella or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	18.64%
Values	Daily Returns

AFP Capital SA  vs.  Falabella

AFP Capital SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFP Capital SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, AFP Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Falabella

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Falabella are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Falabella is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AFP Capital and Falabella

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

The idea behind AFP Capital SA and Falabella 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.

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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.