Correlation Between CN MODERN and SAN MIGUEL

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

By analyzing existing cross correlation between CN MODERN DAIRY and SAN MIGUEL BREWERY, you can compare the effects of market volatilities on CN MODERN and SAN MIGUEL 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 CN MODERN with a short position of SAN MIGUEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and SAN MIGUEL.

Diversification Opportunities for CN MODERN and SAN MIGUEL

0.31

Correlation Coefficient

CN MODERN  SAN MIGUEL

Weak diversification

The 3 months correlation between 07M and SAN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of CN MODERN i.e., CN MODERN and SAN MIGUEL go up and down completely randomly.

Pair Corralation between CN MODERN and SAN MIGUEL

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.17 times more return on investment than SAN MIGUEL. However, CN MODERN is 1.17 times more volatile than SAN MIGUEL BREWERY. It trades about 0.08 of its potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about 0.0 per unit of risk. If you would invest  11.00  in CN MODERN DAIRY on December 19, 2024 and sell it today you would earn a total of  2.00  from holding CN MODERN DAIRY or generate 18.18% return on investment over 90 days.

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

CN MODERN DAIRY  vs.  SAN MIGUEL BREWERY

CN MODERN DAIRY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CN MODERN and SAN MIGUEL

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

The idea behind CN MODERN DAIRY and SAN MIGUEL BREWERY 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.