Correlation Between PT Ace and United Breweries

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

By analyzing existing cross correlation between PT Ace Hardware and United Breweries Co, you can compare the effects of market volatilities on PT Ace and United Breweries 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 PT Ace with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and United Breweries.

Diversification Opportunities for PT Ace and United Breweries

-0.44

Correlation Coefficient

PT Ace  United Breweries

Very good diversification

The 3 months correlation between 4AH1 and United is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and PT Ace 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 PT Ace Hardware are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of PT Ace i.e., PT Ace and United Breweries go up and down completely randomly.

Pair Corralation between PT Ace and United Breweries

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 5.83 times more return on investment than United Breweries. However, PT Ace is 5.83 times more volatile than United Breweries Co. It trades about 0.13 of its potential returns per unit of risk. United Breweries Co is currently generating about 0.04 per unit of risk. If you would invest  3.75  in PT Ace Hardware on October 4, 2024 and sell it today you would earn a total of  0.55  from holding PT Ace Hardware or generate 14.67% return on investment over 90 days.

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

PT Ace Hardware  vs.  United Breweries Co

PT Ace Hardware

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Ace Hardware are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, PT Ace is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Breweries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PT Ace and United Breweries

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

The idea behind PT Ace Hardware and United Breweries Co 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.