Correlation Between Vodafone Idea and United Breweries

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

By analyzing existing cross correlation between Vodafone Idea Limited and United Breweries Limited, you can compare the effects of market volatilities on Vodafone Idea and United 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 Vodafone Idea with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Idea and United Breweries.

Diversification Opportunities for Vodafone Idea and United Breweries

0.28

Correlation Coefficient

Vodafone Idea  United Breweries

Modest diversification

The 3 months correlation between Vodafone and United is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Idea Limited and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Vodafone Idea 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 Vodafone Idea Limited are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of Vodafone Idea i.e., Vodafone Idea and United Breweries go up and down completely randomly.

Pair Corralation between Vodafone Idea and United Breweries

Assuming the 90 days trading horizon Vodafone Idea Limited is expected to generate 2.46 times more return on investment than United Breweries. However, Vodafone Idea is 2.46 times more volatile than United Breweries Limited. It trades about 0.03 of its potential returns per unit of risk. United Breweries Limited is currently generating about 0.05 per unit of risk. If you would invest  745.00  in Vodafone Idea Limited on October 22, 2024 and sell it today you would earn a total of  166.00  from holding Vodafone Idea Limited or generate 22.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.48%
Values	Daily Returns

Vodafone Idea Limited  vs.  United Breweries Limited

Vodafone Idea Limited

Risk-Adjusted Performance

4 of 100

Insignificant

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

United Breweries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vodafone Idea and United Breweries

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

The idea behind Vodafone Idea Limited and United Breweries Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.