Correlation Between Compania Cervecerias and Gildan Activewear

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

Diversification Opportunities for Compania Cervecerias and Gildan Activewear

0.07

Correlation Coefficient

Compania Cervecerias  Gildan Activewear

Significant diversification

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

Pair Corralation between Compania Cervecerias and Gildan Activewear

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.92 times more return on investment than Gildan Activewear. However, Compania Cervecerias Unidas is 1.09 times less risky than Gildan Activewear. It trades about 0.34 of its potential returns per unit of risk. Gildan Activewear is currently generating about 0.01 per unit of risk. If you would invest  1,167  in Compania Cervecerias Unidas on December 20, 2024 and sell it today you would earn a total of  372.00  from holding Compania Cervecerias Unidas or generate 31.88% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Gildan Activewear

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 26 (%) 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.

Gildan Activewear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gildan Activewear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Gildan Activewear is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Compania Cervecerias and Gildan Activewear

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

The idea behind Compania Cervecerias Unidas and Gildan Activewear 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 Transaction History module to view history of all your transactions and understand their impact on performance.