Correlation Between Embotelladora Andina and COCA A

Can any of the company-specific risk be diversified away by investing in both Embotelladora Andina and COCA A 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 COCA A 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 COCA A HBC, you can compare the effects of market volatilities on Embotelladora Andina and COCA A 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 COCA A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embotelladora Andina and COCA A.

Diversification Opportunities for Embotelladora Andina and COCA A

0.07

Correlation Coefficient

Embotelladora Andina  COCA A

Significant diversification

The 3 months correlation between Embotelladora and COCA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and COCA A HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A HBC 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 COCA A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A HBC has no effect on the direction of Embotelladora Andina i.e., Embotelladora Andina and COCA A go up and down completely randomly.

Pair Corralation between Embotelladora Andina and COCA A

Assuming the 90 days trading horizon Embotelladora Andina SA is expected to generate 1.46 times more return on investment than COCA A. However, Embotelladora Andina is 1.46 times more volatile than COCA A HBC. It trades about 0.09 of its potential returns per unit of risk. COCA A HBC is currently generating about -0.09 per unit of risk. If you would invest  1,610  in Embotelladora Andina SA on September 27, 2024 and sell it today you would earn a total of  60.00  from holding Embotelladora Andina SA or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Embotelladora Andina SA  vs.  COCA A HBC

Embotelladora Andina

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Embotelladora Andina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

COCA A HBC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, COCA A is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Embotelladora Andina and COCA A

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

The idea behind Embotelladora Andina SA and COCA A HBC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.