Correlation Between ARISTOCRAT LEISURE and United Breweries

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

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

Diversification Opportunities for ARISTOCRAT LEISURE and United Breweries

-0.22

Correlation Coefficient

ARISTOCRAT LEISURE  United Breweries

Very good diversification

The 3 months correlation between ARISTOCRAT and United is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ARISTOCRAT LEISURE and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE i.e., ARISTOCRAT LEISURE and United Breweries go up and down completely randomly.

Pair Corralation between ARISTOCRAT LEISURE and United Breweries

Assuming the 90 days trading horizon ARISTOCRAT LEISURE is expected to under-perform the United Breweries. But the stock apears to be less risky and, when comparing its historical volatility, ARISTOCRAT LEISURE is 1.08 times less risky than United Breweries. The stock trades about -0.08 of its potential returns per unit of risk. The United Breweries Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,080  in United Breweries Co on December 24, 2024 and sell it today you would earn a total of  290.00  from holding United Breweries Co or generate 26.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ARISTOCRAT LEISURE  vs.  United Breweries Co

ARISTOCRAT LEISURE

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARISTOCRAT LEISURE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

United Breweries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, United Breweries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARISTOCRAT LEISURE and United Breweries

The main advantage of trading using opposite ARISTOCRAT LEISURE and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.