Correlation Between Compania Cervecerias and Vulcan Materials

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

Diversification Opportunities for Compania Cervecerias and Vulcan Materials

-0.77

Correlation Coefficient

Compania Cervecerias  Vulcan Materials

Pay attention - limited upside

The 3 months correlation between Compania and Vulcan is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Vulcan Materials go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Vulcan Materials

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.86 times more return on investment than Vulcan Materials. However, Compania Cervecerias Unidas is 1.17 times less risky than Vulcan Materials. It trades about 0.32 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.09 per unit of risk. If you would invest  1,162  in Compania Cervecerias Unidas on December 19, 2024 and sell it today you would earn a total of  347.00  from holding Compania Cervecerias Unidas or generate 29.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  Vulcan Materials

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 25 (%) 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.

Vulcan Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vulcan Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Compania Cervecerias and Vulcan Materials

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

The idea behind Compania Cervecerias Unidas and Vulcan Materials 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.