Correlation Between National Beverage and Embotelladora Andina

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

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

Diversification Opportunities for National Beverage and Embotelladora Andina

-0.06

Correlation Coefficient

National Beverage  Embotelladora Andina

Good diversification

The 3 months correlation between National and Embotelladora is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage 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 National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Embotelladora Andina go up and down completely randomly.

Pair Corralation between National Beverage and Embotelladora Andina

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the Embotelladora Andina. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 1.73 times less risky than Embotelladora Andina. The stock trades about -0.07 of its potential returns per unit of risk. The Embotelladora Andina SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,458  in Embotelladora Andina SA on September 30, 2024 and sell it today you would earn a total of  232.00  from holding Embotelladora Andina SA or generate 15.91% return on investment over 90 days.

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

National Beverage Corp  vs.  Embotelladora Andina SA

National Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, National Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with National Beverage and Embotelladora Andina

The main advantage of trading using opposite National Beverage and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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 National Beverage Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.