Correlation Between Shyam Metalics and United Breweries

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

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

Diversification Opportunities for Shyam Metalics and United Breweries

0.26

Correlation Coefficient

Shyam Metalics  United Breweries

Modest diversification

The 3 months correlation between Shyam and United is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shyam Metalics and and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Shyam Metalics 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 Shyam Metalics and 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 Shyam Metalics i.e., Shyam Metalics and United Breweries go up and down completely randomly.

Pair Corralation between Shyam Metalics and United Breweries

Assuming the 90 days trading horizon Shyam Metalics and is expected to under-perform the United Breweries. In addition to that, Shyam Metalics is 1.58 times more volatile than United Breweries Limited. It trades about -0.12 of its total potential returns per unit of risk. United Breweries Limited is currently generating about 0.17 per unit of volatility. If you would invest  195,100  in United Breweries Limited on October 6, 2024 and sell it today you would earn a total of  17,710  from holding United Breweries Limited or generate 9.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shyam Metalics and  vs.  United Breweries Limited

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shyam Metalics and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

United Breweries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shyam Metalics and United Breweries

The main advantage of trading using opposite Shyam Metalics and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shyam Metalics 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 Shyam Metalics and 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.