Correlation Between Compania Cervecerias and Talon Energy

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

Diversification Opportunities for Compania Cervecerias and Talon Energy

-0.76

Correlation Coefficient

Compania Cervecerias  Talon Energy

Pay attention - limited upside

The 3 months correlation between Compania and Talon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Talon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Energy 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 Talon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Energy has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Talon Energy go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Talon Energy

If you would invest  5.00  in Talon Energy on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Talon Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.4%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  Talon Energy

Compania Cervecerias

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 8 (%) 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.

Talon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Talon Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compania Cervecerias and Talon Energy

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

The idea behind Compania Cervecerias Unidas and Talon Energy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.