Correlation Between INTERNATIONAL BREWERIES and CHAMPION BREWERIES

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

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

Diversification Opportunities for INTERNATIONAL BREWERIES and CHAMPION BREWERIES

0.73

Correlation Coefficient

INTERNATIONAL BREWERIES  CHAMPION BREWERIES

Poor diversification

The 3 months correlation between INTERNATIONAL and CHAMPION is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL BREWERIES PLC and CHAMPION BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAMPION BREWERIES PLC and INTERNATIONAL 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 INTERNATIONAL BREWERIES PLC are associated (or correlated) with CHAMPION BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAMPION BREWERIES PLC has no effect on the direction of INTERNATIONAL BREWERIES i.e., INTERNATIONAL BREWERIES and CHAMPION BREWERIES go up and down completely randomly.

Pair Corralation between INTERNATIONAL BREWERIES and CHAMPION BREWERIES

Assuming the 90 days trading horizon INTERNATIONAL BREWERIES PLC is expected to generate 0.91 times more return on investment than CHAMPION BREWERIES. However, INTERNATIONAL BREWERIES PLC is 1.1 times less risky than CHAMPION BREWERIES. It trades about 0.04 of its potential returns per unit of risk. CHAMPION BREWERIES PLC is currently generating about 0.02 per unit of risk. If you would invest  375.00  in INTERNATIONAL BREWERIES PLC on October 21, 2024 and sell it today you would earn a total of  165.00  from holding INTERNATIONAL BREWERIES PLC or generate 44.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

INTERNATIONAL BREWERIES PLC  vs.  CHAMPION BREWERIES PLC

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, INTERNATIONAL BREWERIES showed solid returns over the last few months and may actually be approaching a breakup point.

CHAMPION BREWERIES PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHAMPION BREWERIES PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CHAMPION BREWERIES may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INTERNATIONAL BREWERIES and CHAMPION BREWERIES

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

The idea behind INTERNATIONAL BREWERIES PLC and CHAMPION 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.