Correlation Between United Breweries and THAI BEVERAGE

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

Diversification Opportunities for United Breweries and THAI BEVERAGE

0.59

Correlation Coefficient

United Breweries  THAI BEVERAGE

Very weak diversification

The 3 months correlation between United and THAI is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE 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 THAI BEVERAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THAI BEVERAGE has no effect on the direction of United Breweries i.e., United Breweries and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between United Breweries and THAI BEVERAGE

Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.73 times more return on investment than THAI BEVERAGE. However, United Breweries Co is 1.37 times less risky than THAI BEVERAGE. It trades about 0.1 of its potential returns per unit of risk. THAI BEVERAGE is currently generating about 0.05 per unit of risk. If you would invest  1,025  in United Breweries Co on October 26, 2024 and sell it today you would earn a total of  95.00  from holding United Breweries Co or generate 9.27% return on investment over 90 days.

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

United Breweries Co  vs.  THAI BEVERAGE

United Breweries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 7 (%) 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 February 2025.

THAI BEVERAGE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THAI BEVERAGE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, THAI BEVERAGE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Breweries and THAI BEVERAGE

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

The idea behind United Breweries Co and THAI BEVERAGE 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.