Correlation Between INTERNATIONAL BREWERIES and UNIVERSAL INSURANCE

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

Diversification Opportunities for INTERNATIONAL BREWERIES and UNIVERSAL INSURANCE

0.87

Correlation Coefficient

INTERNATIONAL BREWERIES  UNIVERSAL INSURANCE

Very poor diversification

The 3 months correlation between INTERNATIONAL and UNIVERSAL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL BREWERIES PLC and UNIVERSAL INSURANCE PANY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL INSURANCE PANY 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 UNIVERSAL INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL INSURANCE PANY has no effect on the direction of INTERNATIONAL BREWERIES i.e., INTERNATIONAL BREWERIES and UNIVERSAL INSURANCE go up and down completely randomly.

Pair Corralation between INTERNATIONAL BREWERIES and UNIVERSAL INSURANCE

Assuming the 90 days trading horizon INTERNATIONAL BREWERIES is expected to generate 2.77 times less return on investment than UNIVERSAL INSURANCE. But when comparing it to its historical volatility, INTERNATIONAL BREWERIES PLC is 1.95 times less risky than UNIVERSAL INSURANCE. It trades about 0.19 of its potential returns per unit of risk. UNIVERSAL INSURANCE PANY is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  36.00  in UNIVERSAL INSURANCE PANY on October 11, 2024 and sell it today you would earn a total of  42.00  from holding UNIVERSAL INSURANCE PANY or generate 116.67% return on investment over 90 days.

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

INTERNATIONAL BREWERIES PLC  vs.  UNIVERSAL INSURANCE PANY

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 15 (%) 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.

UNIVERSAL INSURANCE PANY

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL INSURANCE PANY are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, UNIVERSAL INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL BREWERIES and UNIVERSAL INSURANCE

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

The idea behind INTERNATIONAL BREWERIES PLC and UNIVERSAL INSURANCE PANY 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.