Correlation Between United Breweries and PT Ace

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

Diversification Opportunities for United Breweries and PT Ace

-0.44

Correlation Coefficient

United Breweries  PT Ace

Very good diversification

The 3 months correlation between United and 4AH1 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and PT Ace Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Ace Hardware 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 PT Ace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Ace Hardware has no effect on the direction of United Breweries i.e., United Breweries and PT Ace go up and down completely randomly.

Pair Corralation between United Breweries and PT Ace

Assuming the 90 days trading horizon United Breweries is expected to generate 17.59 times less return on investment than PT Ace. But when comparing it to its historical volatility, United Breweries Co is 5.83 times less risky than PT Ace. It trades about 0.04 of its potential returns per unit of risk. PT Ace Hardware is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3.75  in PT Ace Hardware on October 4, 2024 and sell it today you would earn a total of  0.55  from holding PT Ace Hardware or generate 14.67% return on investment over 90 days.

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

United Breweries Co  vs.  PT Ace Hardware

United Breweries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PT Ace Hardware

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Ace Hardware are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, PT Ace is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Breweries and PT Ace

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

The idea behind United Breweries Co and PT Ace Hardware 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.