Correlation Between Carlsberg and Budweiser Brewing

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

By analyzing existing cross correlation between Carlsberg AS and Budweiser Brewing, you can compare the effects of market volatilities on Carlsberg and Budweiser Brewing 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 Carlsberg with a short position of Budweiser Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg and Budweiser Brewing.

Diversification Opportunities for Carlsberg and Budweiser Brewing

0.57

Correlation Coefficient

Carlsberg  Budweiser Brewing

Very weak diversification

The 3 months correlation between Carlsberg and Budweiser is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Budweiser Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budweiser Brewing and Carlsberg 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 Carlsberg AS are associated (or correlated) with Budweiser Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budweiser Brewing has no effect on the direction of Carlsberg i.e., Carlsberg and Budweiser Brewing go up and down completely randomly.

Pair Corralation between Carlsberg and Budweiser Brewing

Assuming the 90 days horizon Carlsberg AS is expected to generate 0.43 times more return on investment than Budweiser Brewing. However, Carlsberg AS is 2.31 times less risky than Budweiser Brewing. It trades about -0.09 of its potential returns per unit of risk. Budweiser Brewing is currently generating about -0.19 per unit of risk. If you would invest  2,129  in Carlsberg AS on September 12, 2024 and sell it today you would lose (78.00) from holding Carlsberg AS or give up 3.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Carlsberg AS  vs.  Budweiser Brewing

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Budweiser Brewing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Budweiser Brewing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Budweiser Brewing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carlsberg and Budweiser Brewing

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

The idea behind Carlsberg AS and Budweiser Brewing 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..