Correlation Between CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES

Can any of the company-specific risk be diversified away by investing in both CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES 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 CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CUSTODIAN INVESTMENT PLC and INTERNATIONAL BREWERIES PLC, you can compare the effects of market volatilities on CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES 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 CUSTODIAN INVESTMENT with a short position of INTERNATIONAL BREWERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES.

Diversification Opportunities for CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES

-0.2

Correlation Coefficient

CUSTODIAN INVESTMENT  INTERNATIONAL BREWERIES

Good diversification

The 3 months correlation between CUSTODIAN and INTERNATIONAL is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CUSTODIAN INVESTMENT PLC and INTERNATIONAL BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL BREWERIES and CUSTODIAN INVESTMENT 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 CUSTODIAN INVESTMENT PLC are associated (or correlated) with INTERNATIONAL BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL BREWERIES has no effect on the direction of CUSTODIAN INVESTMENT i.e., CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES go up and down completely randomly.

Pair Corralation between CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES

Assuming the 90 days trading horizon CUSTODIAN INVESTMENT PLC is expected to generate 1.02 times more return on investment than INTERNATIONAL BREWERIES. However, CUSTODIAN INVESTMENT is 1.02 times more volatile than INTERNATIONAL BREWERIES PLC. It trades about 0.09 of its potential returns per unit of risk. INTERNATIONAL BREWERIES PLC is currently generating about -0.04 per unit of risk. If you would invest  1,710  in CUSTODIAN INVESTMENT PLC on December 30, 2024 and sell it today you would earn a total of  240.00  from holding CUSTODIAN INVESTMENT PLC or generate 14.04% return on investment over 90 days.

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

CUSTODIAN INVESTMENT PLC  vs.  INTERNATIONAL BREWERIES PLC

CUSTODIAN INVESTMENT PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CUSTODIAN INVESTMENT PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, CUSTODIAN INVESTMENT demonstrated solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INTERNATIONAL BREWERIES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, INTERNATIONAL BREWERIES is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CUSTODIAN INVESTMENT and INTERNATIONAL BREWERIES

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

The idea behind CUSTODIAN INVESTMENT PLC and INTERNATIONAL BREWERIES PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.