Correlation Between Cencosud and Colbun

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

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

Diversification Opportunities for Cencosud and Colbun

0.96

Correlation Coefficient

Cencosud  Colbun

Almost no diversification

The 3 months correlation between Cencosud and Colbun is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cencosud and Colbun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colbun and Cencosud 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 Cencosud 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 Cencosud i.e., Cencosud and Colbun go up and down completely randomly.

Pair Corralation between Cencosud and Colbun

Assuming the 90 days trading horizon Cencosud is expected to generate 1.17 times more return on investment than Colbun. However, Cencosud is 1.17 times more volatile than Colbun. It trades about 0.27 of its potential returns per unit of risk. Colbun is currently generating about 0.25 per unit of risk. If you would invest  208,000  in Cencosud on December 2, 2024 and sell it today you would earn a total of  45,000  from holding Cencosud or generate 21.63% return on investment over 90 days.

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

Cencosud  vs.  Colbun

Cencosud

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cencosud are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Cencosud unveiled solid returns over the last few months and may actually be approaching a breakup point.

Colbun

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 19 (%) 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 Cencosud and Colbun

The main advantage of trading using opposite Cencosud and Colbun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cencosud 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 Cencosud 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.