Correlation Between Banco De and Nitratos

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

By analyzing existing cross correlation between Banco de Credito and Nitratos de Chile, you can compare the effects of market volatilities on Banco De and Nitratos 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 Banco De with a short position of Nitratos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Nitratos.

Diversification Opportunities for Banco De and Nitratos

-0.14

Correlation Coefficient

Banco De  Nitratos

Good diversification

The 3 months correlation between Banco and Nitratos is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and Nitratos de Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitratos de Chile and Banco De 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 Banco de Credito are associated (or correlated) with Nitratos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitratos de Chile has no effect on the direction of Banco De i.e., Banco De and Nitratos go up and down completely randomly.

Pair Corralation between Banco De and Nitratos

Assuming the 90 days trading horizon Banco de Credito is expected to generate 1.01 times more return on investment than Nitratos. However, Banco De is 1.01 times more volatile than Nitratos de Chile. It trades about 0.0 of its potential returns per unit of risk. Nitratos de Chile is currently generating about -0.06 per unit of risk. If you would invest  2,799,000  in Banco de Credito on September 5, 2024 and sell it today you would lose (19,000) from holding Banco de Credito or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Banco de Credito  vs.  Nitratos de Chile

Banco de Credito

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco de Credito has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Banco De is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Nitratos de Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitratos de Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nitratos is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banco De and Nitratos

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

The idea behind Banco de Credito and Nitratos de Chile 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.