Correlation Between CF Bankshares and Banco De

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

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

Diversification Opportunities for CF Bankshares and Banco De

-0.77

Correlation Coefficient

CF Bankshares  Banco De

Pay attention - limited upside

The 3 months correlation between CFBK and Banco is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile and CF Bankshares 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 CF Bankshares are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of CF Bankshares i.e., CF Bankshares and Banco De go up and down completely randomly.

Pair Corralation between CF Bankshares and Banco De

Given the investment horizon of 90 days CF Bankshares is expected to under-perform the Banco De. But the stock apears to be less risky and, when comparing its historical volatility, CF Bankshares is 2.42 times less risky than Banco De. The stock trades about -0.37 of its potential returns per unit of risk. The Banco De Chile is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,203  in Banco De Chile on February 1, 2024 and sell it today you would earn a total of  5.00  from holding Banco De Chile or generate 0.23% return on investment over 90 days.

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

CF Bankshares  vs.  Banco De Chile

CF Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Banco De Chile

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Banco De is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CF Bankshares and Banco De

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

The idea behind CF Bankshares and Banco De Chile 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.