Correlation Between Molson Coors and Associated British

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

By analyzing existing cross correlation between Molson Coors Beverage and Associated British Foods, you can compare the effects of market volatilities on Molson Coors and Associated British 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 Molson Coors with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Associated British.

Diversification Opportunities for Molson Coors and Associated British

0.9

Correlation Coefficient

Molson Coors  Associated British

Almost no diversification

The 3 months correlation between Molson and Associated is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Molson Coors 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 Molson Coors Beverage are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Molson Coors i.e., Molson Coors and Associated British go up and down completely randomly.

Pair Corralation between Molson Coors and Associated British

Assuming the 90 days trading horizon Molson Coors is expected to generate 4.18 times less return on investment than Associated British. But when comparing it to its historical volatility, Molson Coors Beverage is 3.0 times less risky than Associated British. It trades about 0.03 of its potential returns per unit of risk. Associated British Foods is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  96,664  in Associated British Foods on November 20, 2024 and sell it today you would earn a total of  96,836  from holding Associated British Foods or generate 100.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.18%
Values	Daily Returns

Molson Coors Beverage  vs.  Associated British Foods

Molson Coors Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molson Coors Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Molson Coors is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Associated British Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Molson Coors and Associated British

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

The idea behind Molson Coors Beverage and Associated British Foods 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.