Correlation Between Phoenix Mills and United Breweries

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

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

Diversification Opportunities for Phoenix Mills and United Breweries

0.22

Correlation Coefficient

Phoenix Mills  United Breweries

Modest diversification

The 3 months correlation between Phoenix and United is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Phoenix Mills and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Phoenix Mills 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 The Phoenix Mills 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 Phoenix Mills i.e., Phoenix Mills and United Breweries go up and down completely randomly.

Pair Corralation between Phoenix Mills and United Breweries

Assuming the 90 days trading horizon The Phoenix Mills is expected to generate 1.83 times more return on investment than United Breweries. However, Phoenix Mills is 1.83 times more volatile than United Breweries Limited. It trades about 0.0 of its potential returns per unit of risk. United Breweries Limited is currently generating about -0.03 per unit of risk. If you would invest  173,000  in The Phoenix Mills on December 25, 2024 and sell it today you would lose (4,835) from holding The Phoenix Mills or give up 2.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

The Phoenix Mills  vs.  United Breweries Limited

Phoenix Mills

Risk-Adjusted Performance

Very Weak

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

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

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.