Correlation Between Embotelladora Andina and Fbec Worldwide

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

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

Diversification Opportunities for Embotelladora Andina and Fbec Worldwide

0.36

Correlation Coefficient

Embotelladora Andina  Fbec Worldwide

Weak diversification

The 3 months correlation between Embotelladora and Fbec is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and Fbec Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fbec Worldwide and Embotelladora Andina 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 Embotelladora Andina SA are associated (or correlated) with Fbec Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fbec Worldwide has no effect on the direction of Embotelladora Andina i.e., Embotelladora Andina and Fbec Worldwide go up and down completely randomly.

Pair Corralation between Embotelladora Andina and Fbec Worldwide

Assuming the 90 days horizon Embotelladora Andina SA is expected to under-perform the Fbec Worldwide. But the stock apears to be less risky and, when comparing its historical volatility, Embotelladora Andina SA is 66.57 times less risky than Fbec Worldwide. The stock trades about -0.11 of its potential returns per unit of risk. The Fbec Worldwide is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Fbec Worldwide on August 30, 2024 and sell it today you would lose (0.02) from holding Fbec Worldwide or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Embotelladora Andina SA  vs.  Fbec Worldwide

Embotelladora Andina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embotelladora Andina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Fbec Worldwide

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fbec Worldwide are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Fbec Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embotelladora Andina and Fbec Worldwide

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

The idea behind Embotelladora Andina SA and Fbec Worldwide 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..