Correlation Between Compania Cervecerias and West Red

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

Diversification Opportunities for Compania Cervecerias and West Red

0.0

Correlation Coefficient

Compania Cervecerias  West Red

Pay attention - limited upside

The 3 months correlation between Compania and West is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake 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 West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and West Red go up and down completely randomly.

Pair Corralation between Compania Cervecerias and West Red

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.43 times more return on investment than West Red. However, Compania Cervecerias Unidas is 2.34 times less risky than West Red. It trades about 0.06 of its potential returns per unit of risk. West Red Lake is currently generating about -0.04 per unit of risk. If you would invest  1,147  in Compania Cervecerias Unidas on October 25, 2024 and sell it today you would earn a total of  49.00  from holding Compania Cervecerias Unidas or generate 4.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  West Red Lake

Compania Cervecerias

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 4 (%) 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.

West Red Lake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Red Lake has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Compania Cervecerias and West Red

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

The idea behind Compania Cervecerias Unidas and West Red Lake 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.