Correlation Between United Breweries and Playmates Toys

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

Diversification Opportunities for United Breweries and Playmates Toys

-0.05

Correlation Coefficient

United Breweries  Playmates Toys

Good diversification

The 3 months correlation between United and Playmates is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys 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 Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of United Breweries i.e., United Breweries and Playmates Toys go up and down completely randomly.

Pair Corralation between United Breweries and Playmates Toys

Assuming the 90 days trading horizon United Breweries is expected to generate 1.85 times less return on investment than Playmates Toys. But when comparing it to its historical volatility, United Breweries Co is 7.65 times less risky than Playmates Toys. It trades about 0.23 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.90  in Playmates Toys Limited on December 23, 2024 and sell it today you would lose (0.20) from holding Playmates Toys Limited or give up 2.9% of portfolio value over 90 days.

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

United Breweries Co  vs.  Playmates Toys Limited

United Breweries

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, United Breweries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Playmates Toys

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Playmates Toys Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Playmates Toys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Breweries and Playmates Toys

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

The idea behind United Breweries Co and Playmates Toys Limited 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.