Correlation Between Masisa and Las Condes

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

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

Diversification Opportunities for Masisa and Las Condes

0.49

Correlation Coefficient

Masisa  Las Condes

Very weak diversification

The 3 months correlation between Masisa and Las is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Masisa and Las Condes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Condes and Masisa 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 Masisa are associated (or correlated) with Las Condes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Condes has no effect on the direction of Masisa i.e., Masisa and Las Condes go up and down completely randomly.

Pair Corralation between Masisa and Las Condes

Assuming the 90 days trading horizon Masisa is expected to under-perform the Las Condes. But the stock apears to be less risky and, when comparing its historical volatility, Masisa is 3.47 times less risky than Las Condes. The stock trades about -0.23 of its potential returns per unit of risk. The Las Condes is currently generating about -0.02 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	91.53%
Values	Daily Returns

Masisa  vs.  Las Condes

Masisa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masisa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Masisa and Las Condes

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

The idea behind Masisa and Las Condes 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.