Correlation Between Empresas Copec and Falabella

Can any of the company-specific risk be diversified away by investing in both Empresas Copec and Falabella 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 Falabella 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 Falabella, you can compare the effects of market volatilities on Empresas Copec and Falabella 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 Falabella. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresas Copec and Falabella.

Diversification Opportunities for Empresas Copec and Falabella

0.75

Correlation Coefficient

Empresas Copec  Falabella

Poor diversification

The 3 months correlation between Empresas and Falabella is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Empresas Copec SA and Falabella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falabella 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 Falabella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falabella has no effect on the direction of Empresas Copec i.e., Empresas Copec and Falabella go up and down completely randomly.

Pair Corralation between Empresas Copec and Falabella

Assuming the 90 days trading horizon Empresas Copec is expected to generate 1.16 times less return on investment than Falabella. But when comparing it to its historical volatility, Empresas Copec SA is 1.1 times less risky than Falabella. It trades about 0.04 of its potential returns per unit of risk. Falabella is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  319,900  in Falabella on September 3, 2024 and sell it today you would earn a total of  10,100  from holding Falabella or generate 3.16% 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.  Falabella

Empresas Copec SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas Copec SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresas Copec is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Falabella

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Falabella are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Falabella is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Empresas Copec and Falabella

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

The idea behind Empresas Copec SA and Falabella 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.