Correlation Between Administradora Americana and Colbun

Can any of the company-specific risk be diversified away by investing in both Administradora Americana and Colbun 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 Colbun 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 Colbun, you can compare the effects of market volatilities on Administradora Americana and Colbun 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 Colbun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Administradora Americana and Colbun.

Diversification Opportunities for Administradora Americana and Colbun

0.87

Correlation Coefficient

Administradora Americana  Colbun

Very poor diversification

The 3 months correlation between Administradora and Colbun is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Administradora Americana de and Colbun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colbun 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 Colbun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colbun has no effect on the direction of Administradora Americana i.e., Administradora Americana and Colbun go up and down completely randomly.

Pair Corralation between Administradora Americana and Colbun

Assuming the 90 days trading horizon Administradora Americana de is expected to generate 1.84 times more return on investment than Colbun. However, Administradora Americana is 1.84 times more volatile than Colbun. It trades about 0.25 of its potential returns per unit of risk. Colbun is currently generating about 0.26 per unit of risk. If you would invest  16,519  in Administradora Americana de on October 24, 2024 and sell it today you would earn a total of  4,328  from holding Administradora Americana de or generate 26.2% return on investment over 90 days.

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

Administradora Americana de  vs.  Colbun

Administradora Americana

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Administradora Americana de are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Administradora Americana unveiled solid returns over the last few months and may actually be approaching a breakup point.

Colbun

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Colbun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Administradora Americana and Colbun

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

The idea behind Administradora Americana de and Colbun 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.