Correlation Between CAP SA and Nitratos

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

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

Diversification Opportunities for CAP SA and Nitratos

0.34

Correlation Coefficient

CAP SA  Nitratos

Weak diversification

The 3 months correlation between CAP and Nitratos is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CAP SA 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 CAP SA 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 CAP SA 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 CAP SA i.e., CAP SA and Nitratos go up and down completely randomly.

Pair Corralation between CAP SA and Nitratos

Assuming the 90 days trading horizon CAP SA is expected to generate 0.88 times more return on investment than Nitratos. However, CAP SA is 1.14 times less risky than Nitratos. It trades about -0.01 of its potential returns per unit of risk. Nitratos de Chile is currently generating about -0.12 per unit of risk. If you would invest  538,500  in CAP SA on December 1, 2024 and sell it today you would lose (6,000) from holding CAP SA or give up 1.11% of portfolio value over 90 days.

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

CAP SA  vs.  Nitratos de Chile

CAP SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAP SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CAP SA is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Nitratos de Chile

Risk-Adjusted Performance

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 CAP SA and Nitratos

The main advantage of trading using opposite CAP SA and Nitratos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP SA 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 CAP SA 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.