Correlation Between SMU SA and Cencosud
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By analyzing existing cross correlation between SMU SA and Cencosud, you can compare the effects of market volatilities on SMU SA and Cencosud 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 SMU SA with a short position of Cencosud. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMU SA and Cencosud.
Diversification Opportunities for SMU SA and Cencosud
Poor diversification
The 3 months correlation between SMU and Cencosud is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SMU SA and Cencosud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cencosud and SMU SA 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 SMU SA are associated (or correlated) with Cencosud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cencosud has no effect on the direction of SMU SA i.e., SMU SA and Cencosud go up and down completely randomly.
Pair Corralation between SMU SA and Cencosud
Assuming the 90 days trading horizon SMU SA is expected to generate 1.32 times less return on investment than Cencosud. But when comparing it to its historical volatility, SMU SA is 1.17 times less risky than Cencosud. It trades about 0.05 of its potential returns per unit of risk. Cencosud is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 154,494 in Cencosud on September 2, 2024 and sell it today you would earn a total of 50,506 from holding Cencosud or generate 32.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMU SA vs. Cencosud
Performance |
| Timeline |
| SMU SA |
| Cencosud |
SMU SA and Cencosud Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMU SA and Cencosud
The main advantage of trading using opposite SMU SA and Cencosud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMU SA position performs unexpectedly, Cencosud 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 Cencosud will offset losses from the drop in Cencosud's long position.The idea behind SMU SA and Cencosud 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.| Cencosud vs. Falabella | Cencosud vs. Empresas Copec SA | Cencosud vs. Sociedad Qumica y | Cencosud vs. Banco Santander Chile |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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