Correlation Between Vina Concha and Embotelladora Andina

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

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

Diversification Opportunities for Vina Concha and Embotelladora Andina

0.73

Correlation Coefficient

Vina Concha  Embotelladora Andina

Poor diversification

The 3 months correlation between Vina and Embotelladora is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vina Concha To and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Vina Concha 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 Vina Concha To are associated (or correlated) with Embotelladora Andina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embotelladora Andina has no effect on the direction of Vina Concha i.e., Vina Concha and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Vina Concha and Embotelladora Andina

Assuming the 90 days trading horizon Vina Concha To is expected to under-perform the Embotelladora Andina. But the stock apears to be less risky and, when comparing its historical volatility, Vina Concha To is 1.0 times less risky than Embotelladora Andina. The stock trades about -0.12 of its potential returns per unit of risk. The Embotelladora Andina SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  227,910  in Embotelladora Andina SA on September 1, 2024 and sell it today you would lose (11,950) from holding Embotelladora Andina SA or give up 5.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Vina Concha To  vs.  Embotelladora Andina SA

Vina Concha To

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vina Concha To has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Embotelladora Andina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embotelladora Andina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Embotelladora Andina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vina Concha and Embotelladora Andina

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

The idea behind Vina Concha To and Embotelladora Andina 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.