Correlation Between Administradora Americana and Cencosud

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

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

Diversification Opportunities for Administradora Americana and Cencosud

0.61

Correlation Coefficient

Administradora Americana  Cencosud

Poor diversification

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

Pair Corralation between Administradora Americana and Cencosud

Assuming the 90 days trading horizon Administradora Americana de is expected to generate 0.99 times more return on investment than Cencosud. However, Administradora Americana de is 1.01 times less risky than Cencosud. It trades about 0.14 of its potential returns per unit of risk. Cencosud is currently generating about 0.12 per unit of risk. If you would invest  17,044  in Administradora Americana de on September 2, 2024 and sell it today you would earn a total of  1,995  from holding Administradora Americana de or generate 11.7% return on investment over 90 days.

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

Administradora Americana de  vs.  Cencosud

Administradora Americana

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Administradora Americana de are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Administradora Americana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cencosud

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cencosud are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Cencosud may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Administradora Americana and Cencosud

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