Correlation Between Medplus Health and United Breweries

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

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

Diversification Opportunities for Medplus Health and United Breweries

0.38

Correlation Coefficient

Medplus Health  United Breweries

Weak diversification

The 3 months correlation between Medplus and United is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Medplus Health Services and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Medplus Health 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 Medplus Health Services 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 Medplus Health i.e., Medplus Health and United Breweries go up and down completely randomly.

Pair Corralation between Medplus Health and United Breweries

Assuming the 90 days trading horizon Medplus Health Services is expected to under-perform the United Breweries. In addition to that, Medplus Health is 1.15 times more volatile than United Breweries Limited. It trades about -0.06 of its total potential returns per unit of risk. United Breweries Limited is currently generating about -0.05 per unit of volatility. If you would invest  205,275  in United Breweries Limited on December 25, 2024 and sell it today you would lose (12,795) from holding United Breweries Limited or give up 6.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Medplus Health Services  vs.  United Breweries Limited

Medplus Health Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medplus Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

United Breweries

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Medplus Health and United Breweries

The main advantage of trading using opposite Medplus Health and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medplus Health 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 Medplus Health Services 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.