Correlation Between Embotelladora Andina and Colbun

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

Diversification Opportunities for Embotelladora Andina and Colbun

0.79

Correlation Coefficient

Embotelladora Andina  Colbun

Poor diversification

The 3 months correlation between Embotelladora and Colbun is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Embotelladora Andina SA and Colbun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colbun 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 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 Embotelladora Andina i.e., Embotelladora Andina and Colbun go up and down completely randomly.

Pair Corralation between Embotelladora Andina and Colbun

Assuming the 90 days trading horizon Embotelladora Andina is expected to generate 1.08 times less return on investment than Colbun. In addition to that, Embotelladora Andina is 1.33 times more volatile than Colbun. It trades about 0.18 of its total potential returns per unit of risk. Colbun is currently generating about 0.26 per unit of volatility. If you would invest  11,549  in Colbun on October 24, 2024 and sell it today you would earn a total of  1,651  from holding Colbun or generate 14.3% return on investment over 90 days.

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

Embotelladora Andina SA  vs.  Colbun

Embotelladora Andina

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Embotelladora Andina sustained 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 Embotelladora Andina and Colbun

The main advantage of trading using opposite Embotelladora Andina and Colbun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embotelladora Andina 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 Embotelladora Andina SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.