Correlation Between United Breweries and COFCO Joycome

Can any of the company-specific risk be diversified away by investing in both United Breweries and COFCO Joycome 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 United Breweries and COFCO Joycome into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Breweries Co and COFCO Joycome Foods, you can compare the effects of market volatilities on United Breweries and COFCO Joycome 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 United Breweries with a short position of COFCO Joycome. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and COFCO Joycome.

Diversification Opportunities for United Breweries and COFCO Joycome

0.44

Correlation Coefficient

United Breweries  COFCO Joycome

Very weak diversification

The 3 months correlation between United and COFCO is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and COFCO Joycome Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFCO Joycome Foods and United Breweries 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 United Breweries Co are associated (or correlated) with COFCO Joycome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFCO Joycome Foods has no effect on the direction of United Breweries i.e., United Breweries and COFCO Joycome go up and down completely randomly.

Pair Corralation between United Breweries and COFCO Joycome

Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.53 times more return on investment than COFCO Joycome. However, United Breweries Co is 1.9 times less risky than COFCO Joycome. It trades about 0.01 of its potential returns per unit of risk. COFCO Joycome Foods is currently generating about 0.0 per unit of risk. If you would invest  1,108  in United Breweries Co on September 18, 2024 and sell it today you would lose (18.00) from holding United Breweries Co or give up 1.62% of portfolio value over 90 days.

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

United Breweries Co  vs.  COFCO Joycome Foods

United Breweries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Breweries unveiled solid returns over the last few months and may actually be approaching a breakup point.

COFCO Joycome Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COFCO Joycome Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COFCO Joycome reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Breweries and COFCO Joycome

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

The idea behind United Breweries Co and COFCO Joycome Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.