Correlation Between Nitratos and Multiexport Foods

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

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

Diversification Opportunities for Nitratos and Multiexport Foods

-0.42

Correlation Coefficient

Nitratos  Multiexport Foods

Very good diversification

The 3 months correlation between Nitratos and Multiexport is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nitratos de Chile and Multiexport Foods SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multiexport Foods and Nitratos 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 Nitratos de Chile are associated (or correlated) with Multiexport Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multiexport Foods has no effect on the direction of Nitratos i.e., Nitratos and Multiexport Foods go up and down completely randomly.

Pair Corralation between Nitratos and Multiexport Foods

Assuming the 90 days trading horizon Nitratos de Chile is expected to under-perform the Multiexport Foods. In addition to that, Nitratos is 1.67 times more volatile than Multiexport Foods SA. It trades about -0.06 of its total potential returns per unit of risk. Multiexport Foods SA is currently generating about 0.25 per unit of volatility. If you would invest  18,809  in Multiexport Foods SA on September 5, 2024 and sell it today you would earn a total of  1,588  from holding Multiexport Foods SA or generate 8.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.1%
Values	Daily Returns

Nitratos de Chile  vs.  Multiexport Foods SA

Nitratos de Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitratos de Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nitratos is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Multiexport Foods

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multiexport Foods SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Multiexport Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nitratos and Multiexport Foods

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

The idea behind Nitratos de Chile and Multiexport Foods 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.