Correlation Between Compania Cervecerias and Sonida Senior

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

Diversification Opportunities for Compania Cervecerias and Sonida Senior

-0.05

Correlation Coefficient

Compania Cervecerias  Sonida Senior

Good diversification

The 3 months correlation between Compania and Sonida is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Sonida Senior go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Sonida Senior

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 72.64 times less return on investment than Sonida Senior. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 2.79 times less risky than Sonida Senior. It trades about 0.0 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,167  in Sonida Senior Living on September 14, 2024 and sell it today you would earn a total of  1,225  from holding Sonida Senior Living or generate 104.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  Sonida Senior Living

Compania Cervecerias

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania Cervecerias and Sonida Senior

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

The idea behind Compania Cervecerias Unidas and Sonida Senior Living 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.