Correlation Between Carlsberg Brewery and Homeritz Bhd

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

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

Diversification Opportunities for Carlsberg Brewery and Homeritz Bhd

0.67

Correlation Coefficient

Carlsberg Brewery  Homeritz Bhd

Poor diversification

The 3 months correlation between Carlsberg and Homeritz is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and Homeritz Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homeritz Bhd and Carlsberg Brewery 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 Carlsberg Brewery Malaysia are associated (or correlated) with Homeritz Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homeritz Bhd has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and Homeritz Bhd go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and Homeritz Bhd

Assuming the 90 days trading horizon Carlsberg Brewery Malaysia is expected to generate 0.47 times more return on investment than Homeritz Bhd. However, Carlsberg Brewery Malaysia is 2.14 times less risky than Homeritz Bhd. It trades about 0.08 of its potential returns per unit of risk. Homeritz Bhd is currently generating about 0.03 per unit of risk. If you would invest  1,842  in Carlsberg Brewery Malaysia on October 17, 2024 and sell it today you would earn a total of  192.00  from holding Carlsberg Brewery Malaysia or generate 10.42% return on investment over 90 days.

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

Carlsberg Brewery Malaysia  vs.  Homeritz Bhd

Carlsberg Brewery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Carlsberg Brewery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Homeritz Bhd

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Carlsberg Brewery and Homeritz Bhd

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

The idea behind Carlsberg Brewery Malaysia and Homeritz Bhd 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 CEOs Directory module to screen CEOs from public companies around the world.