Correlation Between Nitratos and MBI Administradora

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

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

Diversification Opportunities for Nitratos and MBI Administradora

0.28

Correlation Coefficient

Nitratos  MBI Administradora

Modest diversification

The 3 months correlation between Nitratos and MBI is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nitratos de Chile and MBI Administradora General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBI Administradora and Nitratos 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 Nitratos de Chile are associated (or correlated) with MBI Administradora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBI Administradora has no effect on the direction of Nitratos i.e., Nitratos and MBI Administradora go up and down completely randomly.

Pair Corralation between Nitratos and MBI Administradora

Assuming the 90 days trading horizon Nitratos de Chile is expected to generate 0.48 times more return on investment than MBI Administradora. However, Nitratos de Chile is 2.08 times less risky than MBI Administradora. It trades about -0.07 of its potential returns per unit of risk. MBI Administradora General is currently generating about -0.05 per unit of risk. If you would invest  225.00  in Nitratos de Chile on December 27, 2024 and sell it today you would lose (12.00) from holding Nitratos de Chile or give up 5.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Nitratos de Chile  vs.  MBI Administradora General

Nitratos de Chile

Risk-Adjusted Performance

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.

MBI Administradora

Risk-Adjusted Performance

Very Weak

Over the last 90 days MBI Administradora General has generated negative risk-adjusted returns adding no value to fund investors. Even with latest fragile performance, the Fund's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the fund retail investors.

Pair Trading with Nitratos and MBI Administradora

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

The idea behind Nitratos de Chile and MBI Administradora General 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.