Correlation Between Las Condes and Falabella

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

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

Diversification Opportunities for Las Condes and Falabella

-0.46

Correlation Coefficient

Las Condes  Falabella

Very good diversification

The 3 months correlation between Las and Falabella is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Las Condes and Falabella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falabella and Las Condes 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 Las Condes 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 Las Condes i.e., Las Condes and Falabella go up and down completely randomly.

Pair Corralation between Las Condes and Falabella

Assuming the 90 days trading horizon Las Condes is expected to under-perform the Falabella. In addition to that, Las Condes is 1.62 times more volatile than Falabella. It trades about -0.08 of its total potential returns per unit of risk. Falabella is currently generating about 0.03 per unit of volatility. If you would invest  322,200  in Falabella on September 2, 2024 and sell it today you would earn a total of  7,800  from holding Falabella or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

Las Condes  vs.  Falabella

Las Condes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Las Condes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Falabella

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Falabella are ranked lower than 2 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Las Condes and Falabella

The main advantage of trading using opposite Las Condes and Falabella positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Las Condes 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 Las Condes 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.