Correlation Between United Breweries and Alcoa Corp

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

Diversification Opportunities for United Breweries and Alcoa Corp

0.39

Correlation Coefficient

United Breweries  Alcoa Corp

Weak diversification

The 3 months correlation between United and Alcoa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of United Breweries i.e., United Breweries and Alcoa Corp go up and down completely randomly.

Pair Corralation between United Breweries and Alcoa Corp

Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.6 times more return on investment than Alcoa Corp. However, United Breweries Co is 1.68 times less risky than Alcoa Corp. It trades about 0.14 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.37 per unit of risk. If you would invest  1,040  in United Breweries Co on September 29, 2024 and sell it today you would earn a total of  40.00  from holding United Breweries Co or generate 3.85% return on investment over 90 days.

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

United Breweries Co  vs.  Alcoa Corp

United Breweries

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alcoa Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Breweries and Alcoa Corp

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

The idea behind United Breweries Co and Alcoa Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.