Correlation Between Coca-Cola Consolidated and United Breweries

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

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

Diversification Opportunities for Coca-Cola Consolidated and United Breweries

0.22

Correlation Coefficient

Coca-Cola Consolidated  United Breweries

Modest diversification

The 3 months correlation between Coca-Cola and United is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Coca-Cola Consolidated 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 Coca Cola Consolidated 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 Coca-Cola Consolidated i.e., Coca-Cola Consolidated and United Breweries go up and down completely randomly.

Pair Corralation between Coca-Cola Consolidated and United Breweries

Assuming the 90 days horizon Coca Cola Consolidated is expected to generate 1.68 times more return on investment than United Breweries. However, Coca-Cola Consolidated is 1.68 times more volatile than United Breweries Co. It trades about 0.18 of its potential returns per unit of risk. United Breweries Co is currently generating about 0.15 per unit of risk. If you would invest  111,000  in Coca Cola Consolidated on August 31, 2024 and sell it today you would earn a total of  13,000  from holding Coca Cola Consolidated or generate 11.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Coca Cola Consolidated  vs.  United Breweries Co

Coca Cola Consolidated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Consolidated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Coca-Cola Consolidated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

United Breweries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Coca-Cola Consolidated and United Breweries

The main advantage of trading using opposite Coca-Cola Consolidated and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca-Cola Consolidated 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 Coca Cola Consolidated and United Breweries Co 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 Stocks Directory module to find actively traded stocks across global markets.