Correlation Between United Breweries and CeoTronics

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

Diversification Opportunities for United Breweries and CeoTronics

0.76

Correlation Coefficient

United Breweries  CeoTronics

Poor diversification

The 3 months correlation between United and CeoTronics is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of United Breweries i.e., United Breweries and CeoTronics go up and down completely randomly.

Pair Corralation between United Breweries and CeoTronics

Assuming the 90 days trading horizon United Breweries is expected to generate 6.16 times less return on investment than CeoTronics. But when comparing it to its historical volatility, United Breweries Co is 1.27 times less risky than CeoTronics. It trades about 0.01 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  411.00  in CeoTronics AG on September 25, 2024 and sell it today you would earn a total of  179.00  from holding CeoTronics AG or generate 43.55% return on investment over 90 days.

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

United Breweries Co  vs.  CeoTronics AG

United Breweries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 12 (%) 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.

CeoTronics AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Breweries and CeoTronics

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

The idea behind United Breweries Co and CeoTronics 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.