Correlation Between Falabella and Banco De

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

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

Diversification Opportunities for Falabella and Banco De

-0.14

Correlation Coefficient

Falabella  Banco De

Good diversification

The 3 months correlation between Falabella and Banco is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Falabella and Banco de Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Chile and Falabella 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 Falabella are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Chile has no effect on the direction of Falabella i.e., Falabella and Banco De go up and down completely randomly.

Pair Corralation between Falabella and Banco De

Assuming the 90 days trading horizon Falabella is expected to generate 1.63 times more return on investment than Banco De. However, Falabella is 1.63 times more volatile than Banco de Chile. It trades about 0.04 of its potential returns per unit of risk. Banco de Chile is currently generating about -0.08 per unit of risk. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Falabella  vs.  Banco de Chile

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.

Banco de Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco de Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco De is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Falabella and Banco De

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

The idea behind Falabella and Banco de Chile 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.