Correlation Between Nitratos and Cuprum

Can any of the company-specific risk be diversified away by investing in both Nitratos and Cuprum 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 Cuprum 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 Cuprum, you can compare the effects of market volatilities on Nitratos and Cuprum 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 Cuprum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nitratos and Cuprum.

Diversification Opportunities for Nitratos and Cuprum

-0.57

Correlation Coefficient

Nitratos  Cuprum

Excellent diversification

The 3 months correlation between Nitratos and Cuprum is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nitratos de Chile and Cuprum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cuprum 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 Cuprum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cuprum has no effect on the direction of Nitratos i.e., Nitratos and Cuprum go up and down completely randomly.

Pair Corralation between Nitratos and Cuprum

Assuming the 90 days trading horizon Nitratos de Chile is expected to under-perform the Cuprum. In addition to that, Nitratos is 1.07 times more volatile than Cuprum. It trades about -0.06 of its total potential returns per unit of risk. Cuprum is currently generating about 0.08 per unit of volatility. If you would invest  4,928  in Cuprum on September 1, 2024 and sell it today you would earn a total of  312.00  from holding Cuprum or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Nitratos de Chile  vs.  Cuprum

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.

Cuprum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cuprum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cuprum may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Nitratos and Cuprum

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

The idea behind Nitratos de Chile and Cuprum 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.