Correlation Between Budweiser Brewing and Molson Coors

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Can any of the company-specific risk be diversified away by investing in both Budweiser Brewing and Molson Coors 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 Budweiser Brewing and Molson Coors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Budweiser Brewing and Molson Coors Beverage, you can compare the effects of market volatilities on Budweiser Brewing and Molson Coors 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 Budweiser Brewing with a short position of Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budweiser Brewing and Molson Coors.

Diversification Opportunities for Budweiser Brewing and Molson Coors

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Budweiser and Molson is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Budweiser Brewing and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage and Budweiser Brewing 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 Budweiser Brewing are associated (or correlated) with Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Budweiser Brewing i.e., Budweiser Brewing and Molson Coors go up and down completely randomly.

Pair Corralation between Budweiser Brewing and Molson Coors

Assuming the 90 days horizon Budweiser Brewing is expected to under-perform the Molson Coors. In addition to that, Budweiser Brewing is 4.41 times more volatile than Molson Coors Beverage. It trades about -0.02 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.05 per unit of volatility. If you would invest  5,840  in Molson Coors Beverage on September 5, 2024 and sell it today you would earn a total of  160.00  from holding Molson Coors Beverage or generate 2.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Budweiser Brewing  vs.  Molson Coors Beverage

 Performance 
       Timeline  
Budweiser Brewing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Budweiser Brewing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Molson Coors Beverage 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Molson Coors is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Budweiser Brewing and Molson Coors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Budweiser Brewing and Molson Coors

The main advantage of trading using opposite Budweiser Brewing and Molson Coors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budweiser Brewing position performs unexpectedly, Molson Coors 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 Molson Coors will offset losses from the drop in Molson Coors' long position.
The idea behind Budweiser Brewing and Molson Coors Beverage 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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