Correlation Between Embotelladora Andina and Agrometal SAI

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

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

Diversification Opportunities for Embotelladora Andina and Agrometal SAI

-0.82

Correlation Coefficient

Embotelladora Andina  Agrometal SAI

Pay attention - limited upside

The 3 months correlation between Embotelladora and Agrometal is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and Agrometal SAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agrometal SAI and Embotelladora Andina 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 Embotelladora Andina SA are associated (or correlated) with Agrometal SAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agrometal SAI has no effect on the direction of Embotelladora Andina i.e., Embotelladora Andina and Agrometal SAI go up and down completely randomly.

Pair Corralation between Embotelladora Andina and Agrometal SAI

Assuming the 90 days trading horizon Embotelladora Andina SA is expected to generate 0.73 times more return on investment than Agrometal SAI. However, Embotelladora Andina SA is 1.37 times less risky than Agrometal SAI. It trades about 0.1 of its potential returns per unit of risk. Agrometal SAI is currently generating about 0.06 per unit of risk. If you would invest  490,500  in Embotelladora Andina SA on October 11, 2024 and sell it today you would earn a total of  1,679,500  from holding Embotelladora Andina SA or generate 342.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	92.74%
Values	Daily Returns

Embotelladora Andina SA  vs.  Agrometal SAI

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 somewhat strong fundamental drivers, Embotelladora Andina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Agrometal SAI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agrometal SAI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Agrometal SAI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embotelladora Andina and Agrometal SAI

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

The idea behind Embotelladora Andina SA and Agrometal SAI 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.