Correlation Between Compania Cervecerias and 437076BW1

Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias and 437076BW1 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 437076BW1 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 HOME DEPOT INC, you can compare the effects of market volatilities on Compania Cervecerias and 437076BW1 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 437076BW1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and 437076BW1.

Diversification Opportunities for Compania Cervecerias and 437076BW1

-0.43

Correlation Coefficient

Compania Cervecerias  437076BW1

Very good diversification

The 3 months correlation between Compania and 437076BW1 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and HOME DEPOT INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOME DEPOT INC 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 437076BW1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOME DEPOT INC has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and 437076BW1 go up and down completely randomly.

Pair Corralation between Compania Cervecerias and 437076BW1

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 2.9 times more return on investment than 437076BW1. However, Compania Cervecerias is 2.9 times more volatile than HOME DEPOT INC. It trades about 0.09 of its potential returns per unit of risk. HOME DEPOT INC is currently generating about -0.14 per unit of risk. If you would invest  1,123  in Compania Cervecerias Unidas on September 5, 2024 and sell it today you would earn a total of  28.00  from holding Compania Cervecerias Unidas or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  HOME DEPOT INC

Compania Cervecerias

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 5 (%) 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.

HOME DEPOT INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOME DEPOT INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 437076BW1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania Cervecerias and 437076BW1

The main advantage of trading using opposite Compania Cervecerias and 437076BW1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias position performs unexpectedly, 437076BW1 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 437076BW1 will offset losses from the drop in 437076BW1's long position.

The idea behind Compania Cervecerias Unidas and HOME DEPOT INC 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 Stocks Directory module to find actively traded stocks across global markets.