Correlation Between Empresas CMPC and CAP SA

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

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

Diversification Opportunities for Empresas CMPC and CAP SA

0.78

Correlation Coefficient

Empresas CMPC  CAP SA

Poor diversification

The 3 months correlation between Empresas and CAP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Empresas CMPC and CAP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP SA and Empresas CMPC 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 Empresas CMPC are associated (or correlated) with CAP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP SA has no effect on the direction of Empresas CMPC i.e., Empresas CMPC and CAP SA go up and down completely randomly.

Pair Corralation between Empresas CMPC and CAP SA

Assuming the 90 days trading horizon Empresas CMPC is expected to generate 1.89 times less return on investment than CAP SA. But when comparing it to its historical volatility, Empresas CMPC is 1.55 times less risky than CAP SA. It trades about 0.03 of its potential returns per unit of risk. CAP SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  520,550  in CAP SA on September 4, 2024 and sell it today you would earn a total of  17,950  from holding CAP SA or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Empresas CMPC  vs.  CAP SA

Empresas CMPC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas CMPC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Empresas CMPC is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

CAP SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAP SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Empresas CMPC and CAP SA

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

The idea behind Empresas CMPC and CAP SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.