Correlation Between Colbun and Embotelladora Andina

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

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

Diversification Opportunities for Colbun and Embotelladora Andina

0.45

Correlation Coefficient

Colbun  Embotelladora Andina

Very weak diversification

The 3 months correlation between Colbun and Embotelladora is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Colbun and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Colbun 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 Colbun 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 Colbun i.e., Colbun and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Colbun and Embotelladora Andina

Assuming the 90 days trading horizon Colbun is expected to generate 1.29 times less return on investment than Embotelladora Andina. But when comparing it to its historical volatility, Colbun is 1.09 times less risky than Embotelladora Andina. It trades about 0.08 of its potential returns per unit of risk. Embotelladora Andina SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  220,000  in Embotelladora Andina SA on September 15, 2024 and sell it today you would earn a total of  11,240  from holding Embotelladora Andina SA or generate 5.11% return on investment over 90 days.

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

Colbun  vs.  Embotelladora Andina SA

Colbun

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Colbun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Embotelladora Andina

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Embotelladora Andina is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Colbun and Embotelladora Andina

The main advantage of trading using opposite Colbun and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colbun 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 Colbun 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.