Correlation Between Parq Arauco and Falabella

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

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

Diversification Opportunities for Parq Arauco and Falabella

0.24

Correlation Coefficient

Parq Arauco  Falabella

Modest diversification

The 3 months correlation between Parq and Falabella is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Parq Arauco and Falabella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falabella and Parq Arauco 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 Parq Arauco 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 Parq Arauco i.e., Parq Arauco and Falabella go up and down completely randomly.

Pair Corralation between Parq Arauco and Falabella

Assuming the 90 days trading horizon Parq Arauco is expected to generate 1.54 times less return on investment than Falabella. But when comparing it to its historical volatility, Parq Arauco is 1.3 times less risky than Falabella. It trades about 0.06 of its potential returns per unit of risk. Falabella is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  317,700  in Falabella on September 4, 2024 and sell it today you would earn a total of  20,800  from holding Falabella or generate 6.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Parq Arauco  vs.  Falabella

Parq Arauco

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parq Arauco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Parq Arauco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Falabella

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Falabella are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Falabella may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parq Arauco and Falabella

The main advantage of trading using opposite Parq Arauco and Falabella positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parq Arauco 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 Parq Arauco 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.