Correlation Between Empresa Nacional and Cencosud

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

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

Diversification Opportunities for Empresa Nacional and Cencosud

0.87

Correlation Coefficient

Empresa Nacional  Cencosud

Very poor diversification

The 3 months correlation between Empresa and Cencosud is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Nacional de and Cencosud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cencosud and Empresa Nacional 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 Empresa Nacional de are associated (or correlated) with Cencosud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cencosud has no effect on the direction of Empresa Nacional i.e., Empresa Nacional and Cencosud go up and down completely randomly.

Pair Corralation between Empresa Nacional and Cencosud

Assuming the 90 days trading horizon Empresa Nacional is expected to generate 4.41 times less return on investment than Cencosud. But when comparing it to its historical volatility, Empresa Nacional de is 1.17 times less risky than Cencosud. It trades about 0.07 of its potential returns per unit of risk. Cencosud is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  208,000  in Cencosud on December 1, 2024 and sell it today you would earn a total of  45,000  from holding Cencosud or generate 21.63% return on investment over 90 days.

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

Empresa Nacional de  vs.  Cencosud

Empresa Nacional

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Nacional de are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresa Nacional is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cencosud

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cencosud are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Cencosud unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empresa Nacional and Cencosud

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

The idea behind Empresa Nacional de and Cencosud 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.