Correlation Between ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES

Can any of the company-specific risk be diversified away by investing in both ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES 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 ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ECOBANK TRANSNATIONAL INCORPORATED and INTERNATIONAL BREWERIES PLC, you can compare the effects of market volatilities on ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES 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 ECOBANK TRANSNATIONAL with a short position of INTERNATIONAL BREWERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES.

Diversification Opportunities for ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES

0.76

Correlation Coefficient

ECOBANK TRANSNATIONAL  INTERNATIONAL BREWERIES

Poor diversification

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

Pair Corralation between ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES

Assuming the 90 days trading horizon ECOBANK TRANSNATIONAL is expected to generate 3.65 times less return on investment than INTERNATIONAL BREWERIES. But when comparing it to its historical volatility, ECOBANK TRANSNATIONAL INCORPORATED is 2.22 times less risky than INTERNATIONAL BREWERIES. It trades about 0.32 of its potential returns per unit of risk. INTERNATIONAL BREWERIES PLC is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  400.00  in INTERNATIONAL BREWERIES PLC on October 6, 2024 and sell it today you would earn a total of  160.00  from holding INTERNATIONAL BREWERIES PLC or generate 40.0% return on investment over 90 days.

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

ECOBANK TRANSNATIONAL INCORPOR  vs.  INTERNATIONAL BREWERIES PLC

ECOBANK TRANSNATIONAL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ECOBANK TRANSNATIONAL INCORPORATED are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ECOBANK TRANSNATIONAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, INTERNATIONAL BREWERIES showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ECOBANK TRANSNATIONAL and INTERNATIONAL BREWERIES

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

The idea behind ECOBANK TRANSNATIONAL INCORPORATED and INTERNATIONAL BREWERIES PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.