Correlation Between Oatly Group and Compania Cervecerias

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

By analyzing existing cross correlation between Oatly Group AB and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Oatly Group and Compania Cervecerias 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 Oatly Group with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oatly Group and Compania Cervecerias.

Diversification Opportunities for Oatly Group and Compania Cervecerias

-0.8

Correlation Coefficient

Oatly Group  Compania Cervecerias

Pay attention - limited upside

The 3 months correlation between Oatly and Compania is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Oatly Group 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 Oatly Group AB are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Oatly Group i.e., Oatly Group and Compania Cervecerias go up and down completely randomly.

Pair Corralation between Oatly Group and Compania Cervecerias

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Compania Cervecerias. In addition to that, Oatly Group is 6.32 times more volatile than Compania Cervecerias Unidas. It trades about 0.0 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.33 per unit of volatility. If you would invest  1,160  in Compania Cervecerias Unidas on December 21, 2024 and sell it today you would earn a total of  360.00  from holding Compania Cervecerias Unidas or generate 31.03% return on investment over 90 days.

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

Oatly Group AB  vs.  Compania Cervecerias Unidas

Oatly Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Oatly Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oatly Group and Compania Cervecerias

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

The idea behind Oatly Group AB and Compania Cervecerias Unidas 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.