Correlation Between Compania Cervecerias and Collective Mining

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

Diversification Opportunities for Compania Cervecerias and Collective Mining

0.92

Correlation Coefficient

Compania Cervecerias  Collective Mining

Almost no diversification

The 3 months correlation between Compania and Collective is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Collective Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collective Mining 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 Collective Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collective Mining has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Collective Mining go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Collective Mining

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 3.45 times less return on investment than Collective Mining. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 2.48 times less risky than Collective Mining. It trades about 0.33 of its potential returns per unit of risk. Collective Mining is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Collective Mining on December 21, 2024 and sell it today you would earn a total of  618.00  from holding Collective Mining or generate 149.28% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Collective Mining

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 25 (%) 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.

Collective Mining

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Collective Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and Collective Mining

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

The idea behind Compania Cervecerias Unidas and Collective Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.