Correlation Between INTERNATIONAL BREWERIES and DEAP CAPITAL

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

Diversification Opportunities for INTERNATIONAL BREWERIES and DEAP CAPITAL

-0.26

Correlation Coefficient

INTERNATIONAL BREWERIES  DEAP CAPITAL

Very good diversification

The 3 months correlation between INTERNATIONAL and DEAP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL BREWERIES PLC and DEAP CAPITAL MANAGEMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEAP CAPITAL MANAGEMENT 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 DEAP CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEAP CAPITAL MANAGEMENT has no effect on the direction of INTERNATIONAL BREWERIES i.e., INTERNATIONAL BREWERIES and DEAP CAPITAL go up and down completely randomly.

Pair Corralation between INTERNATIONAL BREWERIES and DEAP CAPITAL

Assuming the 90 days trading horizon INTERNATIONAL BREWERIES PLC is expected to under-perform the DEAP CAPITAL. But the stock apears to be less risky and, when comparing its historical volatility, INTERNATIONAL BREWERIES PLC is 2.38 times less risky than DEAP CAPITAL. The stock trades about -0.05 of its potential returns per unit of risk. The DEAP CAPITAL MANAGEMENT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  102.00  in DEAP CAPITAL MANAGEMENT on September 12, 2024 and sell it today you would earn a total of  12.00  from holding DEAP CAPITAL MANAGEMENT or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

INTERNATIONAL BREWERIES PLC  vs.  DEAP CAPITAL MANAGEMENT

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNATIONAL BREWERIES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

DEAP CAPITAL MANAGEMENT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DEAP CAPITAL MANAGEMENT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, DEAP CAPITAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL BREWERIES and DEAP CAPITAL

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

The idea behind INTERNATIONAL BREWERIES PLC and DEAP CAPITAL MANAGEMENT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.