Correlation Between Compania Cervecerias and ScanSource

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

Diversification Opportunities for Compania Cervecerias and ScanSource

0.15

Correlation Coefficient

Compania Cervecerias  ScanSource

Average diversification

The 3 months correlation between Compania and ScanSource is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and ScanSource go up and down completely randomly.

Pair Corralation between Compania Cervecerias and ScanSource

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.75 times more return on investment than ScanSource. However, Compania Cervecerias Unidas is 1.34 times less risky than ScanSource. It trades about 0.05 of its potential returns per unit of risk. ScanSource is currently generating about 0.04 per unit of risk. If you would invest  1,094  in Compania Cervecerias Unidas on September 2, 2024 and sell it today you would earn a total of  52.00  from holding Compania Cervecerias Unidas or generate 4.75% 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.  ScanSource

Compania Cervecerias

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 3 (%) 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.

ScanSource

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Compania Cervecerias and ScanSource

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

The idea behind Compania Cervecerias Unidas and ScanSource 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.