Correlation Between Bigbloc Construction and United Breweries

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

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

Diversification Opportunities for Bigbloc Construction and United Breweries

-0.26

Correlation Coefficient

Bigbloc Construction  United Breweries

Very good diversification

The 3 months correlation between Bigbloc and United is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bigbloc Construction 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 Bigbloc Construction 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 Bigbloc Construction 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 Bigbloc Construction i.e., Bigbloc Construction and United Breweries go up and down completely randomly.

Pair Corralation between Bigbloc Construction and United Breweries

Assuming the 90 days trading horizon Bigbloc Construction Limited is expected to under-perform the United Breweries. In addition to that, Bigbloc Construction is 1.1 times more volatile than United Breweries Limited. It trades about -0.24 of its total potential returns per unit of risk. United Breweries Limited is currently generating about 0.08 per unit of volatility. If you would invest  199,935  in United Breweries Limited on October 24, 2024 and sell it today you would earn a total of  6,515  from holding United Breweries Limited or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bigbloc Construction Limited  vs.  United Breweries Limited

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction 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 essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United Breweries

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Bigbloc Construction and United Breweries

The main advantage of trading using opposite Bigbloc Construction and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bigbloc Construction 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 Bigbloc Construction 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.