Correlation Between Compania and Embotelladora Andina

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

By analyzing existing cross correlation between Compania de Transporte and Embotelladora Andina SA, you can compare the effects of market volatilities on Compania and Embotelladora Andina 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 Compania with a short position of Embotelladora Andina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Embotelladora Andina.

Diversification Opportunities for Compania and Embotelladora Andina

-0.87

Correlation Coefficient

Compania  Embotelladora Andina

Pay attention - limited upside

The 3 months correlation between Compania and Embotelladora is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Compania 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 Compania de Transporte are associated (or correlated) with Embotelladora Andina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embotelladora Andina has no effect on the direction of Compania i.e., Compania and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Compania and Embotelladora Andina

Assuming the 90 days trading horizon Compania de Transporte is expected to under-perform the Embotelladora Andina. In addition to that, Compania is 1.16 times more volatile than Embotelladora Andina SA. It trades about -0.11 of its total potential returns per unit of risk. Embotelladora Andina SA is currently generating about 0.21 per unit of volatility. If you would invest  2,020,000  in Embotelladora Andina SA on December 26, 2024 and sell it today you would earn a total of  872,500  from holding Embotelladora Andina SA or generate 43.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.61%
Values	Daily Returns

Compania de Transporte  vs.  Embotelladora Andina SA

Compania de Transporte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compania de Transporte has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Embotelladora Andina

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Embotelladora Andina sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Embotelladora Andina

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

The idea behind Compania de Transporte and Embotelladora Andina SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.