Correlation Between Sociedad Qumica and Empresas CMPC

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

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

Diversification Opportunities for Sociedad Qumica and Empresas CMPC

0.65

Correlation Coefficient

Sociedad Qumica  Empresas CMPC

Poor diversification

The 3 months correlation between Sociedad and Empresas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Qumica y and Empresas CMPC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresas CMPC and Sociedad Qumica 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 Sociedad Qumica y are associated (or correlated) with Empresas CMPC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresas CMPC has no effect on the direction of Sociedad Qumica i.e., Sociedad Qumica and Empresas CMPC go up and down completely randomly.

Pair Corralation between Sociedad Qumica and Empresas CMPC

Assuming the 90 days trading horizon Sociedad Qumica y is expected to generate 1.92 times more return on investment than Empresas CMPC. However, Sociedad Qumica is 1.92 times more volatile than Empresas CMPC. It trades about 0.08 of its potential returns per unit of risk. Empresas CMPC is currently generating about 0.03 per unit of risk. If you would invest  3,380,000  in Sociedad Qumica y on September 3, 2024 and sell it today you would earn a total of  340,000  from holding Sociedad Qumica y or generate 10.06% return on investment over 90 days.

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

Sociedad Qumica y  vs.  Empresas CMPC

Sociedad Qumica y

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sociedad Qumica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Empresas CMPC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empresas CMPC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Empresas CMPC is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sociedad Qumica and Empresas CMPC

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

The idea behind Sociedad Qumica y and Empresas CMPC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.