Correlation Between Fondo Mutuo and Cencosud

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

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

Diversification Opportunities for Fondo Mutuo and Cencosud

0.81

Correlation Coefficient

Fondo Mutuo  Cencosud

Very poor diversification

The 3 months correlation between Fondo and Cencosud is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fondo Mutuo ETF and Cencosud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cencosud and Fondo Mutuo 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 Fondo Mutuo ETF are associated (or correlated) with Cencosud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cencosud has no effect on the direction of Fondo Mutuo i.e., Fondo Mutuo and Cencosud go up and down completely randomly.

Pair Corralation between Fondo Mutuo and Cencosud

Assuming the 90 days trading horizon Fondo Mutuo is expected to generate 10.36 times less return on investment than Cencosud. But when comparing it to its historical volatility, Fondo Mutuo ETF is 2.08 times less risky than Cencosud. It trades about 0.03 of its potential returns per unit of risk. Cencosud is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  186,000  in Cencosud on August 31, 2024 and sell it today you would earn a total of  21,800  from holding Cencosud or generate 11.72% return on investment over 90 days.

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

Fondo Mutuo ETF  vs.  Cencosud

Fondo Mutuo ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fondo Mutuo ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Fondo Mutuo is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cencosud

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cencosud are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cencosud may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fondo Mutuo and Cencosud

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

The idea behind Fondo Mutuo ETF and Cencosud 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..