Correlation Between Compania Cervecerias and ESGL Holdings

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

Diversification Opportunities for Compania Cervecerias and ESGL Holdings

-0.07

Correlation Coefficient

Compania Cervecerias  ESGL Holdings

Good diversification

The 3 months correlation between Compania and ESGL is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and ESGL Holdings go up and down completely randomly.

Pair Corralation between Compania Cervecerias and ESGL Holdings

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 27.93 times less return on investment than ESGL Holdings. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 7.63 times less risky than ESGL Holdings. It trades about 0.01 of its potential returns per unit of risk. ESGL Holdings Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.68  in ESGL Holdings Limited on October 24, 2024 and sell it today you would lose (0.16) from holding ESGL Holdings Limited or give up 9.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.97%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  ESGL Holdings Limited

Compania Cervecerias

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Compania Cervecerias Unidas has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ESGL Holdings Limited

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESGL Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, ESGL Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and ESGL Holdings

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

The idea behind Compania Cervecerias Unidas and ESGL Holdings Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.