Correlation Between Embotelladora Andina and Blumar

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

Diversification Opportunities for Embotelladora Andina and Blumar

0.69

Correlation Coefficient

Embotelladora Andina  Blumar

Poor diversification

The 3 months correlation between Embotelladora and Blumar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and Blumar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blumar 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 Blumar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blumar has no effect on the direction of Embotelladora Andina i.e., Embotelladora Andina and Blumar go up and down completely randomly.

Pair Corralation between Embotelladora Andina and Blumar

Assuming the 90 days trading horizon Embotelladora Andina SA is expected to generate 1.31 times more return on investment than Blumar. However, Embotelladora Andina is 1.31 times more volatile than Blumar. It trades about -0.09 of its potential returns per unit of risk. Blumar is currently generating about -0.22 per unit of risk. If you would invest  226,510  in Embotelladora Andina SA on September 5, 2024 and sell it today you would lose (11,510) from holding Embotelladora Andina SA or give up 5.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	31.67%
Values	Daily Returns

Embotelladora Andina SA  vs.  Blumar

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 forward indicators, Embotelladora Andina is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Blumar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blumar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Embotelladora Andina and Blumar

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

The idea behind Embotelladora Andina SA and Blumar 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.