Correlation Between Empresas Copec and Colbun

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

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

Diversification Opportunities for Empresas Copec and Colbun

0.6

Correlation Coefficient

Empresas Copec  Colbun

Poor diversification

The 3 months correlation between Empresas and Colbun is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Empresas Copec SA and Colbun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colbun and Empresas Copec 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 Copec SA 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 Empresas Copec i.e., Empresas Copec and Colbun go up and down completely randomly.

Pair Corralation between Empresas Copec and Colbun

Assuming the 90 days trading horizon Empresas Copec is expected to generate 2.28 times less return on investment than Colbun. In addition to that, Empresas Copec is 1.15 times more volatile than Colbun. It trades about 0.03 of its total potential returns per unit of risk. Colbun is currently generating about 0.08 per unit of volatility. If you would invest  7,765  in Colbun on October 21, 2024 and sell it today you would earn a total of  5,095  from holding Colbun or generate 65.61% return on investment over 90 days.

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

Empresas Copec SA  vs.  Colbun

Empresas Copec SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas Copec SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Empresas Copec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Colbun

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Colbun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Empresas Copec and Colbun

The main advantage of trading using opposite Empresas Copec and Colbun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empresas Copec 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 Empresas Copec SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.