Correlation Between Hiru and Embotelladora Andina

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

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

Diversification Opportunities for Hiru and Embotelladora Andina

0.78

Correlation Coefficient

Hiru  Embotelladora Andina

Poor diversification

The 3 months correlation between Hiru and Embotelladora is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hiru Corp. and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Hiru 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 Hiru Corporation 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 Hiru i.e., Hiru and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Hiru and Embotelladora Andina

Given the investment horizon of 90 days Hiru Corporation is expected to under-perform the Embotelladora Andina. In addition to that, Hiru is 4.9 times more volatile than Embotelladora Andina SA. It trades about -0.1 of its total potential returns per unit of risk. Embotelladora Andina SA is currently generating about -0.11 per unit of volatility. If you would invest  1,574  in Embotelladora Andina SA on August 30, 2024 and sell it today you would lose (258.00) from holding Embotelladora Andina SA or give up 16.39% of portfolio value over 90 days.

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

Hiru Corp.  vs.  Embotelladora Andina SA

Hiru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiru Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Embotelladora Andina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embotelladora Andina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hiru and Embotelladora Andina

The main advantage of trading using opposite Hiru and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hiru 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 Hiru Corporation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.