Correlation Between Rocket Internet and SAN MIGUEL

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Can any of the company-specific risk be diversified away by investing in both Rocket Internet and SAN MIGUEL 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 Rocket Internet and SAN MIGUEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and SAN MIGUEL BREWERY, you can compare the effects of market volatilities on Rocket Internet and SAN MIGUEL 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 Rocket Internet with a short position of SAN MIGUEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and SAN MIGUEL.

Diversification Opportunities for Rocket Internet and SAN MIGUEL

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Rocket and SAN is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of Rocket Internet i.e., Rocket Internet and SAN MIGUEL go up and down completely randomly.

Pair Corralation between Rocket Internet and SAN MIGUEL

Assuming the 90 days trading horizon Rocket Internet SE is expected to generate 0.37 times more return on investment than SAN MIGUEL. However, Rocket Internet SE is 2.73 times less risky than SAN MIGUEL. It trades about 0.03 of its potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about -0.02 per unit of risk. If you would invest  1,450  in Rocket Internet SE on October 23, 2024 and sell it today you would earn a total of  30.00  from holding Rocket Internet SE or generate 2.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Rocket Internet SE  vs.  SAN MIGUEL BREWERY

 Performance 
       Timeline  
Rocket Internet SE 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
SAN MIGUEL BREWERY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SAN MIGUEL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rocket Internet and SAN MIGUEL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rocket Internet and SAN MIGUEL

The main advantage of trading using opposite Rocket Internet and SAN MIGUEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet position performs unexpectedly, SAN MIGUEL 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 SAN MIGUEL will offset losses from the drop in SAN MIGUEL's long position.
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.
The idea behind Rocket Internet SE and SAN MIGUEL BREWERY 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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