Correlation Between Blumar and Nitratos

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

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

Diversification Opportunities for Blumar and Nitratos

0.61

Correlation Coefficient

Blumar  Nitratos

Poor diversification

The 3 months correlation between Blumar and Nitratos is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Blumar and Nitratos de Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitratos de Chile and Blumar 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 Blumar are associated (or correlated) with Nitratos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitratos de Chile has no effect on the direction of Blumar i.e., Blumar and Nitratos go up and down completely randomly.

Pair Corralation between Blumar and Nitratos

Assuming the 90 days trading horizon Blumar is expected to under-perform the Nitratos. But the stock apears to be less risky and, when comparing its historical volatility, Blumar is 2.03 times less risky than Nitratos. The stock trades about -0.22 of its potential returns per unit of risk. The Nitratos de Chile is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Nitratos de Chile on September 5, 2024 and sell it today you would lose (19.00) from holding Nitratos de Chile or give up 7.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	32.2%
Values	Daily Returns

Blumar  vs.  Nitratos de Chile

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.

Nitratos de Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitratos de Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Blumar and Nitratos

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

The idea behind Blumar and Nitratos de Chile 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.