Correlation Between Banco De and Quinenco

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

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

Diversification Opportunities for Banco De and Quinenco

0.94

Correlation Coefficient

Banco De  Quinenco

Almost no diversification

The 3 months correlation between Banco and Quinenco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Chile and Quinenco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quinenco and Banco De 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 Banco de Chile are associated (or correlated) with Quinenco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quinenco has no effect on the direction of Banco De i.e., Banco De and Quinenco go up and down completely randomly.

Pair Corralation between Banco De and Quinenco

Assuming the 90 days trading horizon Banco de Chile is expected to generate 0.61 times more return on investment than Quinenco. However, Banco de Chile is 1.65 times less risky than Quinenco. It trades about 0.41 of its potential returns per unit of risk. Quinenco is currently generating about 0.21 per unit of risk. If you would invest  10,485  in Banco de Chile on December 25, 2024 and sell it today you would earn a total of  2,075  from holding Banco de Chile or generate 19.79% return on investment over 90 days.

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

Banco de Chile  vs.  Quinenco

Banco de Chile

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Chile are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Banco De unveiled solid returns over the last few months and may actually be approaching a breakup point.

Quinenco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quinenco are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Quinenco exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco De and Quinenco

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

The idea behind Banco de Chile and Quinenco 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.