Correlation Between Barings BDC and Compania Cervecerias

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

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

Diversification Opportunities for Barings BDC and Compania Cervecerias

-0.02

Correlation Coefficient

Barings BDC  Compania Cervecerias

Good diversification

The 3 months correlation between Barings and Compania is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Barings BDC and Compania Cervecerias

Given the investment horizon of 90 days Barings BDC is expected to under-perform the Compania Cervecerias. But the stock apears to be less risky and, when comparing its historical volatility, Barings BDC is 1.14 times less risky than Compania Cervecerias. The stock trades about -0.01 of its potential returns per unit of risk. The 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Barings BDC  vs.  Compania Cervecerias Unidas

Barings BDC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Barings BDC and Compania Cervecerias

The main advantage of trading using opposite Barings BDC and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.