Correlation Between Berkeley Energy and Embotelladora Andina

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

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

Diversification Opportunities for Berkeley Energy and Embotelladora Andina

0.78

Correlation Coefficient

Berkeley Energy  Embotelladora Andina

Poor diversification

The 3 months correlation between Berkeley and Embotelladora is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energy and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina and Berkeley Energy 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 Berkeley Energy 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 Berkeley Energy i.e., Berkeley Energy and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Berkeley Energy and Embotelladora Andina

Assuming the 90 days horizon Berkeley Energy is expected to generate 1.12 times more return on investment than Embotelladora Andina. However, Berkeley Energy is 1.12 times more volatile than Embotelladora Andina SA. It trades about 0.18 of its potential returns per unit of risk. Embotelladora Andina SA is currently generating about -0.03 per unit of risk. If you would invest  25.00  in Berkeley Energy on March 15, 2024 and sell it today you would earn a total of  2.00  from holding Berkeley Energy or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Berkeley Energy  vs.  Embotelladora Andina SA

Berkeley Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Berkeley Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Embotelladora Andina

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embotelladora Andina SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Embotelladora Andina sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Berkeley Energy and Embotelladora Andina

The main advantage of trading using opposite Berkeley Energy and Embotelladora Andina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkeley Energy 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 Berkeley Energy 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.