Correlation Between Compania Cervecerias and BTU Metals

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

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

Diversification Opportunities for Compania Cervecerias and BTU Metals

-0.34

Correlation Coefficient

Compania Cervecerias  BTU Metals

Very good diversification

The 3 months correlation between Compania and BTU is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp and Compania Cervecerias 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 Compania Cervecerias Unidas are associated (or correlated) with BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and BTU Metals go up and down completely randomly.

Pair Corralation between Compania Cervecerias and BTU Metals

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 1.81 times less return on investment than BTU Metals. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 2.18 times less risky than BTU Metals. It trades about 0.05 of its potential returns per unit of risk. BTU Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.91  in BTU Metals Corp on October 25, 2024 and sell it today you would earn a total of  0.09  from holding BTU Metals Corp or generate 4.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  BTU Metals Corp

Compania Cervecerias

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

BTU Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BTU Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Compania Cervecerias and BTU Metals

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

The idea behind Compania Cervecerias Unidas and BTU Metals Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..