Correlation Between Compania Cervecerias and RLX Technology

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

Diversification Opportunities for Compania Cervecerias and RLX Technology

0.01

Correlation Coefficient

Compania Cervecerias  RLX Technology

Significant diversification

The 3 months correlation between Compania and RLX is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and RLX Technology go up and down completely randomly.

Pair Corralation between Compania Cervecerias and RLX Technology

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.43 times more return on investment than RLX Technology. However, Compania Cervecerias Unidas is 2.33 times less risky than RLX Technology. It trades about 0.36 of its potential returns per unit of risk. RLX Technology is currently generating about -0.05 per unit of risk. If you would invest  1,131  in Compania Cervecerias Unidas on December 28, 2024 and sell it today you would earn a total of  404.00  from holding Compania Cervecerias Unidas or generate 35.72% 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.  RLX Technology

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 28 (%) 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.

RLX Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLX Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compania Cervecerias and RLX Technology

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

The idea behind Compania Cervecerias Unidas and RLX Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.