Correlation Between Anheuser Busch and Compania Cervecerias

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

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

Diversification Opportunities for Anheuser Busch and Compania Cervecerias

-0.13

Correlation Coefficient

Anheuser Busch  Compania Cervecerias

Good diversification

The 3 months correlation between Anheuser and Compania is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Anheuser Busch 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 Anheuser Busch InBev SANV 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 Anheuser Busch i.e., Anheuser Busch and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Anheuser Busch and Compania Cervecerias

Assuming the 90 days horizon Anheuser Busch InBev SANV is expected to under-perform the Compania Cervecerias. But the pink sheet apears to be less risky and, when comparing its historical volatility, Anheuser Busch InBev SANV is 1.08 times less risky than Compania Cervecerias. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Compania Cervecerias Unidas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Compania Cervecerias Unidas on September 12, 2024 and sell it today you would earn a total of  153.50  from holding Compania Cervecerias Unidas or generate 14.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Anheuser Busch InBev SANV  vs.  Compania Cervecerias Unidas

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compania Cervecerias

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anheuser Busch and Compania Cervecerias

The main advantage of trading using opposite Anheuser Busch and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch InBev SANV 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 Transaction History module to view history of all your transactions and understand their impact on performance.