Correlation Between Britvic PLC and UOL Group

Can any of the company-specific risk be diversified away by investing in both Britvic PLC and UOL Group 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 Britvic PLC and UOL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Britvic PLC ADR and UOL Group Ltd, you can compare the effects of market volatilities on Britvic PLC and UOL Group 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 Britvic PLC with a short position of UOL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Britvic PLC and UOL Group.

Diversification Opportunities for Britvic PLC and UOL Group

0.25

Correlation Coefficient

Britvic PLC  UOL Group

Modest diversification

The 3 months correlation between Britvic and UOL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Britvic PLC ADR and UOL Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOL Group and Britvic PLC 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 Britvic PLC ADR are associated (or correlated) with UOL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOL Group has no effect on the direction of Britvic PLC i.e., Britvic PLC and UOL Group go up and down completely randomly.

Pair Corralation between Britvic PLC and UOL Group

Assuming the 90 days horizon Britvic PLC ADR is expected to generate 0.47 times more return on investment than UOL Group. However, Britvic PLC ADR is 2.14 times less risky than UOL Group. It trades about -0.1 of its potential returns per unit of risk. UOL Group Ltd is currently generating about -0.06 per unit of risk. If you would invest  3,295  in Britvic PLC ADR on October 27, 2024 and sell it today you would lose (156.00) from holding Britvic PLC ADR or give up 4.73% of portfolio value over 90 days.

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

Britvic PLC ADR  vs.  UOL Group Ltd

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Britvic PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Britvic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

UOL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UOL Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, UOL Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Britvic PLC and UOL Group

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

The idea behind Britvic PLC ADR and UOL Group Ltd 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.