Correlation Between Banco De and Raffles Education

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

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

Diversification Opportunities for Banco De and Raffles Education

-0.53

Correlation Coefficient

Banco De  Raffles Education

Excellent diversification

The 3 months correlation between Banco and Raffles is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Raffles Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raffles Education and Banco De 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 Banco De Chile are associated (or correlated) with Raffles Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raffles Education has no effect on the direction of Banco De i.e., Banco De and Raffles Education go up and down completely randomly.

Pair Corralation between Banco De and Raffles Education

Considering the 90-day investment horizon Banco De Chile is expected to generate 1.16 times more return on investment than Raffles Education. However, Banco De is 1.16 times more volatile than Raffles Education. It trades about 0.04 of its potential returns per unit of risk. Raffles Education is currently generating about -0.05 per unit of risk. If you would invest  1,673  in Banco De Chile on January 26, 2024 and sell it today you would earn a total of  556.00  from holding Banco De Chile or generate 33.23% return on investment over 90 days.

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

Banco De Chile  vs.  Raffles Education

Banco De Chile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Raffles Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raffles Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Banco De and Raffles Education

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

The idea behind Banco De Chile and Raffles Education 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.