Correlation Between Gentex and Compania Cervecerias

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

By analyzing existing cross correlation between Gentex and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Gentex and Compania Cervecerias 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 Gentex with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gentex and Compania Cervecerias.

Diversification Opportunities for Gentex and Compania Cervecerias

-0.85

Correlation Coefficient

Gentex  Compania Cervecerias

Pay attention - limited upside

The 3 months correlation between Gentex and Compania is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Gentex 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 Gentex are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Gentex i.e., Gentex and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Gentex and Compania Cervecerias

Given the investment horizon of 90 days Gentex is expected to under-perform the Compania Cervecerias. But the stock apears to be less risky and, when comparing its historical volatility, Gentex is 1.52 times less risky than Compania Cervecerias. The stock trades about -0.16 of its potential returns per unit of risk. The Compania Cervecerias Unidas is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  1,194  in Compania Cervecerias Unidas on December 4, 2024 and sell it today you would earn a total of  203.00  from holding Compania Cervecerias Unidas or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Gentex  vs.  Compania Cervecerias Unidas

Gentex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentex and Compania Cervecerias

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

The idea behind Gentex and Compania Cervecerias Unidas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.