Correlation Between BF Investment and United Breweries

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

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

Diversification Opportunities for BF Investment and United Breweries

0.48

Correlation Coefficient

BF Investment  United Breweries

Very weak diversification

The 3 months correlation between BFINVEST and United is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and BF Investment 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 BF Investment Limited 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 BF Investment i.e., BF Investment and United Breweries go up and down completely randomly.

Pair Corralation between BF Investment and United Breweries

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the United Breweries. In addition to that, BF Investment is 1.82 times more volatile than United Breweries Limited. It trades about -0.17 of its total potential returns per unit of risk. United Breweries Limited is currently generating about -0.03 per unit of volatility. If you would invest  201,510  in United Breweries Limited on December 26, 2024 and sell it today you would lose (9,030) from holding United Breweries Limited or give up 4.48% of portfolio value over 90 days.

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

BF Investment Limited  vs.  United Breweries Limited

BF Investment Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BF Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United Breweries

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BF Investment and United Breweries

The main advantage of trading using opposite BF Investment and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BF Investment 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 BF Investment Limited and United Breweries Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.