Correlation Between Compania Cervecerias and Carlsberg A/S

Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias and Carlsberg A/S 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 Carlsberg A/S 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 Carlsberg AS, you can compare the effects of market volatilities on Compania Cervecerias and Carlsberg A/S 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 Carlsberg A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and Carlsberg A/S.

Diversification Opportunities for Compania Cervecerias and Carlsberg A/S

0.83

Correlation Coefficient

Compania Cervecerias  Carlsberg A/S

Very poor diversification

The 3 months correlation between Compania and Carlsberg is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg A/S 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 Carlsberg A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg A/S has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Carlsberg A/S go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Carlsberg A/S

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.59 times more return on investment than Carlsberg A/S. However, Compania Cervecerias Unidas is 1.69 times less risky than Carlsberg A/S. It trades about 0.35 of its potential returns per unit of risk. Carlsberg AS is currently generating about 0.2 per unit of risk. If you would invest  1,131  in Compania Cervecerias Unidas on December 30, 2024 and sell it today you would earn a total of  401.00  from holding Compania Cervecerias Unidas or generate 35.46% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Carlsberg AS

Compania Cervecerias

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Carlsberg A/S

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Carlsberg A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and Carlsberg A/S

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

The idea behind Compania Cervecerias Unidas and Carlsberg AS 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.