Correlation Between United Breweries and Metro AG

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

Diversification Opportunities for United Breweries and Metro AG

-0.26

Correlation Coefficient

United Breweries  Metro AG

Very good diversification

The 3 months correlation between United and Metro is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of United Breweries i.e., United Breweries and Metro AG go up and down completely randomly.

Pair Corralation between United Breweries and Metro AG

Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.61 times more return on investment than Metro AG. However, United Breweries Co is 1.63 times less risky than Metro AG. It trades about 0.0 of its potential returns per unit of risk. Metro AG is currently generating about -0.01 per unit of risk. If you would invest  1,155  in United Breweries Co on October 4, 2024 and sell it today you would lose (85.00) from holding United Breweries Co or give up 7.36% 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.  Metro AG

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.

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Metro AG 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 Metro AG

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

The idea behind United Breweries Co and Metro AG 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.