Correlation Between Enel Amricas and Embotelladora Andina

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

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

Diversification Opportunities for Enel Amricas and Embotelladora Andina

0.61

Correlation Coefficient

Enel Amricas  Embotelladora Andina

Poor diversification

The 3 months correlation between Enel and Embotelladora is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Enel Amricas SA and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Enel Amricas 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 Enel Amricas SA 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 Enel Amricas i.e., Enel Amricas and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Enel Amricas and Embotelladora Andina

Assuming the 90 days trading horizon Enel Amricas SA is expected to under-perform the Embotelladora Andina. In addition to that, Enel Amricas is 1.15 times more volatile than Embotelladora Andina SA. It trades about -0.05 of its total potential returns per unit of risk. Embotelladora Andina SA is currently generating about 0.02 per unit of volatility. If you would invest  220,000  in Embotelladora Andina SA on September 13, 2024 and sell it today you would earn a total of  1,910  from holding Embotelladora Andina SA or generate 0.87% return on investment over 90 days.

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

Enel Amricas SA  vs.  Embotelladora Andina SA

Enel Amricas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel Amricas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Enel Amricas 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 1 (%) 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 Enel Amricas and Embotelladora Andina

The main advantage of trading using opposite Enel Amricas and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel Amricas 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 Enel Amricas SA 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.