Correlation Between Aldel Financial and Compania Cervecerias

Can any of the company-specific risk be diversified away by investing in both Aldel Financial and Compania Cervecerias 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 Aldel Financial and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Aldel Financial and Compania Cervecerias 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 Aldel Financial with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Compania Cervecerias.

Diversification Opportunities for Aldel Financial and Compania Cervecerias

-0.43

Correlation Coefficient

Aldel Financial  Compania Cervecerias

Very good diversification

The 3 months correlation between Aldel and Compania is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Aldel Financial i.e., Aldel Financial and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Aldel Financial and Compania Cervecerias

Given the investment horizon of 90 days Aldel Financial is expected to generate 7.4 times less return on investment than Compania Cervecerias. But when comparing it to its historical volatility, Aldel Financial II is 9.95 times less risky than Compania Cervecerias. It trades about 0.26 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,105  in Compania Cervecerias Unidas on October 25, 2024 and sell it today you would earn a total of  91.00  from holding Compania Cervecerias Unidas or generate 8.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	64.1%
Values	Daily Returns

Aldel Financial II  vs.  Compania Cervecerias Unidas

Aldel Financial II

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Compania Cervecerias

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aldel Financial and Compania Cervecerias

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

The idea behind Aldel Financial II and Compania Cervecerias Unidas 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.