Correlation Between Compania Cervecerias and HUTCHMED DRC

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

Diversification Opportunities for Compania Cervecerias and HUTCHMED DRC

0.51

Correlation Coefficient

Compania Cervecerias  HUTCHMED DRC

Very weak diversification

The 3 months correlation between Compania and HUTCHMED is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC 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 HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Compania Cervecerias and HUTCHMED DRC

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.42 times more return on investment than HUTCHMED DRC. However, Compania Cervecerias Unidas is 2.39 times less risky than HUTCHMED DRC. It trades about 0.33 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about 0.08 per unit of risk. If you would invest  1,160  in Compania Cervecerias Unidas on December 21, 2024 and sell it today you would earn a total of  360.00  from holding Compania Cervecerias Unidas or generate 31.03% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  HUTCHMED DRC

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 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.

HUTCHMED DRC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HUTCHMED DRC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HUTCHMED DRC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and HUTCHMED DRC

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

The idea behind Compania Cervecerias Unidas and HUTCHMED DRC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.