Correlation Between Contango ORE and Compania Cervecerias

Can any of the company-specific risk be diversified away by investing in both Contango ORE and Compania Cervecerias 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 Contango ORE and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Contango ORE and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Contango ORE and Compania Cervecerias 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 Contango ORE with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contango ORE and Compania Cervecerias.

Diversification Opportunities for Contango ORE and Compania Cervecerias

-0.62

Correlation Coefficient

Contango ORE  Compania Cervecerias

Excellent diversification

The 3 months correlation between Contango and Compania is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Contango ORE 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 Contango ORE are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Contango ORE i.e., Contango ORE and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Contango ORE and Compania Cervecerias

Given the investment horizon of 90 days Contango ORE is expected to generate 21.9 times less return on investment than Compania Cervecerias. In addition to that, Contango ORE is 2.74 times more volatile than Compania Cervecerias Unidas. It trades about 0.01 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.32 per unit of volatility. If you would invest  1,167  in Compania Cervecerias Unidas on December 20, 2024 and sell it today you would earn a total of  353.00  from holding Compania Cervecerias Unidas or generate 30.25% return on investment over 90 days.

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

Contango ORE  vs.  Compania Cervecerias Unidas

Contango ORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Contango ORE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Compania Cervecerias

Risk-Adjusted Performance

Strong

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.

Pair Trading with Contango ORE and Compania Cervecerias

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

The idea behind Contango ORE and Compania Cervecerias Unidas 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.