Correlation Between Empresas Copec and Cencosud

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

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

Diversification Opportunities for Empresas Copec and Cencosud

0.5

Correlation Coefficient

Empresas Copec  Cencosud

Very weak diversification

The 3 months correlation between Empresas and Cencosud is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Empresas Copec SA and Cencosud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cencosud and Empresas Copec 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 Copec SA 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 Empresas Copec i.e., Empresas Copec and Cencosud go up and down completely randomly.

Pair Corralation between Empresas Copec and Cencosud

Assuming the 90 days trading horizon Empresas Copec is expected to generate 4.44 times less return on investment than Cencosud. In addition to that, Empresas Copec is 1.07 times more volatile than Cencosud. It trades about 0.02 of its total potential returns per unit of risk. Cencosud is currently generating about 0.07 per unit of volatility. If you would invest  126,408  in Cencosud on August 31, 2024 and sell it today you would earn a total of  81,392  from holding Cencosud or generate 64.39% return on investment over 90 days.

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

Empresas Copec SA  vs.  Cencosud

Empresas Copec SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas Copec SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresas Copec is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 Empresas Copec and Cencosud

The main advantage of trading using opposite Empresas Copec and Cencosud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empresas Copec 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 Empresas Copec SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.