Correlation Between Las Condes and Nitratos

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

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

Diversification Opportunities for Las Condes and Nitratos

0.25

Correlation Coefficient

Las Condes  Nitratos

Modest diversification

The 3 months correlation between Las and Nitratos is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Las Condes and Nitratos de Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitratos de Chile 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 Nitratos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitratos de Chile has no effect on the direction of Las Condes i.e., Las Condes and Nitratos go up and down completely randomly.

Pair Corralation between Las Condes and Nitratos

Assuming the 90 days trading horizon Las Condes is expected to generate 2.01 times more return on investment than Nitratos. However, Las Condes is 2.01 times more volatile than Nitratos de Chile. It trades about -0.02 of its potential returns per unit of risk. Nitratos de Chile is currently generating about -0.07 per unit of risk. If you would invest  1,220,000  in Las Condes on September 14, 2024 and sell it today you would lose (72,900) from holding Las Condes or give up 5.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.1%
Values	Daily Returns

Las Condes  vs.  Nitratos de Chile

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 rather sound basic indicators, Las Condes is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nitratos de Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nitratos de Chile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nitratos is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Las Condes and Nitratos

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

The idea behind Las Condes and Nitratos 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.