Correlation Between Compania Cervecerias and Global Partners

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

Diversification Opportunities for Compania Cervecerias and Global Partners

0.05

Correlation Coefficient

Compania Cervecerias  Global Partners

Significant diversification

The 3 months correlation between Compania and Global is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Global Partners go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Global Partners

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate about the same return on investment as Global Partners LP. However, Compania Cervecerias is 5.87 times more volatile than Global Partners LP. It trades about 0.03 of its potential returns per unit of risk. Global Partners LP is currently producing about 0.17 per unit of risk. If you would invest  2,552  in Global Partners LP on October 4, 2024 and sell it today you would earn a total of  63.00  from holding Global Partners LP or generate 2.47% 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.  Global Partners LP

Compania Cervecerias

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 2 (%) 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.

Global Partners LP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania Cervecerias and Global Partners

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

The idea behind Compania Cervecerias Unidas and Global Partners LP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.