Correlation Between SAN MIGUEL and Rocket Internet
Can any of the company-specific risk be diversified away by investing in both SAN MIGUEL and Rocket Internet 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 SAN MIGUEL and Rocket Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAN MIGUEL BREWERY and Rocket Internet SE, you can compare the effects of market volatilities on SAN MIGUEL and Rocket Internet 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 SAN MIGUEL with a short position of Rocket Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAN MIGUEL and Rocket Internet.
Diversification Opportunities for SAN MIGUEL and Rocket Internet
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SAN and Rocket is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE and SAN MIGUEL 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 SAN MIGUEL BREWERY are associated (or correlated) with Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of SAN MIGUEL i.e., SAN MIGUEL and Rocket Internet go up and down completely randomly.
Pair Corralation between SAN MIGUEL and Rocket Internet
Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to under-perform the Rocket Internet. In addition to that, SAN MIGUEL is 1.73 times more volatile than Rocket Internet SE. It trades about 0.0 of its total potential returns per unit of risk. Rocket Internet SE is currently generating about 0.08 per unit of volatility. If you would invest 1,490 in Rocket Internet SE on December 21, 2024 and sell it today you would earn a total of 140.00 from holding Rocket Internet SE or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAN MIGUEL BREWERY vs. Rocket Internet SE
Performance |
| Timeline |
| SAN MIGUEL BREWERY |
| Rocket Internet SE |
SAN MIGUEL and Rocket Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SAN MIGUEL and Rocket Internet
The main advantage of trading using opposite SAN MIGUEL and Rocket Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SAN MIGUEL position performs unexpectedly, Rocket Internet 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 Rocket Internet will offset losses from the drop in Rocket Internet's long position.The idea behind SAN MIGUEL BREWERY and Rocket Internet SE 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.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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