Correlation Between Compania Cervecerias and MidCap Financial

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

Diversification Opportunities for Compania Cervecerias and MidCap Financial

0.6

Correlation Coefficient

Compania Cervecerias  MidCap Financial

Poor diversification

The 3 months correlation between Compania and MidCap is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and MidCap Financial go up and down completely randomly.

Pair Corralation between Compania Cervecerias and MidCap Financial

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 2.8 times more return on investment than MidCap Financial. However, Compania Cervecerias is 2.8 times more volatile than MidCap Financial Investment. It trades about 0.21 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.08 per unit of risk. If you would invest  1,105  in Compania Cervecerias Unidas on October 26, 2024 and sell it today you would earn a total of  98.00  from holding Compania Cervecerias Unidas or generate 8.87% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  MidCap Financial Investment

Compania Cervecerias

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 4 (%) 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.

MidCap Financial Inv

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MidCap Financial Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, MidCap Financial is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Compania Cervecerias and MidCap Financial

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

The idea behind Compania Cervecerias Unidas and MidCap Financial Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.