Correlation Between Compania Cervecerias and GameStop Corp

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

Diversification Opportunities for Compania Cervecerias and GameStop Corp

-0.82

Correlation Coefficient

Compania Cervecerias  GameStop Corp

Pay attention - limited upside

The 3 months correlation between Compania and GameStop is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and GameStop Corp go up and down completely randomly.

Pair Corralation between Compania Cervecerias and GameStop Corp

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.42 times more return on investment than GameStop Corp. However, Compania Cervecerias Unidas is 2.37 times less risky than GameStop Corp. It trades about 0.33 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.06 per unit of risk. If you would invest  1,158  in Compania Cervecerias Unidas on December 26, 2024 and sell it today you would earn a total of  377.00  from holding Compania Cervecerias Unidas or generate 32.56% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  GameStop Corp

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 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.

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Compania Cervecerias and GameStop Corp

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

The idea behind Compania Cervecerias Unidas and GameStop Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.