Correlation Between Empresas CMPC and Salfacorp

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

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

Diversification Opportunities for Empresas CMPC and Salfacorp

0.33

Correlation Coefficient

Empresas CMPC  Salfacorp

Weak diversification

The 3 months correlation between Empresas and Salfacorp is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Empresas CMPC and Salfacorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salfacorp and Empresas CMPC 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 Empresas CMPC are associated (or correlated) with Salfacorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salfacorp has no effect on the direction of Empresas CMPC i.e., Empresas CMPC and Salfacorp go up and down completely randomly.

Pair Corralation between Empresas CMPC and Salfacorp

Assuming the 90 days trading horizon Empresas CMPC is expected to generate 1.86 times less return on investment than Salfacorp. In addition to that, Empresas CMPC is 1.05 times more volatile than Salfacorp. It trades about 0.04 of its total potential returns per unit of risk. Salfacorp is currently generating about 0.08 per unit of volatility. If you would invest  52,900  in Salfacorp on September 3, 2024 and sell it today you would earn a total of  2,900  from holding Salfacorp or generate 5.48% return on investment over 90 days.

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

Empresas CMPC  vs.  Salfacorp

Empresas CMPC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas CMPC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Empresas CMPC is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Salfacorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Salfacorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Salfacorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Empresas CMPC and Salfacorp

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

The idea behind Empresas CMPC and Salfacorp 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.