Correlation Between Cencosud and CAP SA

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

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

Diversification Opportunities for Cencosud and CAP SA

0.16

Correlation Coefficient

Cencosud  CAP SA

Average diversification

The 3 months correlation between Cencosud and CAP is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cencosud and CAP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP SA and Cencosud 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 Cencosud are associated (or correlated) with CAP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP SA has no effect on the direction of Cencosud i.e., Cencosud and CAP SA go up and down completely randomly.

Pair Corralation between Cencosud and CAP SA

Assuming the 90 days trading horizon Cencosud is expected to generate 0.71 times more return on investment than CAP SA. However, Cencosud is 1.4 times less risky than CAP SA. It trades about 0.14 of its potential returns per unit of risk. CAP SA is currently generating about 0.04 per unit of risk. If you would invest  186,000  in Cencosud on September 5, 2024 and sell it today you would earn a total of  22,000  from holding Cencosud or generate 11.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Cencosud  vs.  CAP SA

Cencosud

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cencosud are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Cencosud may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CAP SA

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Cencosud and CAP SA

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

The idea behind Cencosud and CAP 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.