Correlation Between COCA A and Embotelladora Andina

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

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

Diversification Opportunities for COCA A and Embotelladora Andina

0.07

Correlation Coefficient

COCA A  Embotelladora Andina

Significant diversification

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

Pair Corralation between COCA A and Embotelladora Andina

Assuming the 90 days trading horizon COCA A is expected to generate 3.9 times less return on investment than Embotelladora Andina. But when comparing it to its historical volatility, COCA A HBC is 1.76 times less risky than Embotelladora Andina. It trades about 0.01 of its potential returns per unit of risk. Embotelladora Andina SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,617  in Embotelladora Andina SA on September 27, 2024 and sell it today you would earn a total of  53.00  from holding Embotelladora Andina SA or generate 3.28% return on investment over 90 days.

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

COCA A HBC  vs.  Embotelladora Andina SA

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.

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.

Pair Trading with COCA A and Embotelladora Andina

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

The idea behind COCA A HBC and Embotelladora Andina SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.