Correlation Between Anheuser Busch and UBM Development

Can any of the company-specific risk be diversified away by investing in both Anheuser Busch and UBM Development 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 Anheuser Busch and UBM Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anheuser Busch InBev SANV and UBM Development AG, you can compare the effects of market volatilities on Anheuser Busch and UBM Development 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 Anheuser Busch with a short position of UBM Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and UBM Development.

Diversification Opportunities for Anheuser Busch and UBM Development

0.82

Correlation Coefficient

Anheuser Busch  UBM Development

Very poor diversification

The 3 months correlation between Anheuser and UBM is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and UBM Development AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBM Development AG and Anheuser Busch 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 Anheuser Busch InBev SANV are associated (or correlated) with UBM Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBM Development AG has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and UBM Development go up and down completely randomly.

Pair Corralation between Anheuser Busch and UBM Development

Assuming the 90 days trading horizon Anheuser Busch is expected to generate 1.26 times less return on investment than UBM Development. But when comparing it to its historical volatility, Anheuser Busch InBev SANV is 1.39 times less risky than UBM Development. It trades about 0.19 of its potential returns per unit of risk. UBM Development AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,610  in UBM Development AG on December 29, 2024 and sell it today you would earn a total of  400.00  from holding UBM Development AG or generate 24.84% return on investment over 90 days.

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

Anheuser Busch InBev SANV  vs.  UBM Development AG

Anheuser Busch InBev

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch InBev SANV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Anheuser Busch demonstrated solid returns over the last few months and may actually be approaching a breakup point.

UBM Development AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBM Development AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, UBM Development demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anheuser Busch and UBM Development

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

The idea behind Anheuser Busch InBev SANV and UBM Development AG 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.