Correlation Between SOVEREIGN TRUST and INTERNATIONAL BREWERIES

Can any of the company-specific risk be diversified away by investing in both SOVEREIGN TRUST and INTERNATIONAL 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 SOVEREIGN TRUST and INTERNATIONAL BREWERIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOVEREIGN TRUST INSURANCE and INTERNATIONAL BREWERIES PLC, you can compare the effects of market volatilities on SOVEREIGN TRUST and INTERNATIONAL 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 SOVEREIGN TRUST with a short position of INTERNATIONAL BREWERIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOVEREIGN TRUST and INTERNATIONAL BREWERIES.

Diversification Opportunities for SOVEREIGN TRUST and INTERNATIONAL BREWERIES

-0.18

Correlation Coefficient

SOVEREIGN TRUST  INTERNATIONAL BREWERIES

Good diversification

The 3 months correlation between SOVEREIGN and INTERNATIONAL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SOVEREIGN TRUST INSURANCE and INTERNATIONAL BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL BREWERIES and SOVEREIGN TRUST 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 SOVEREIGN TRUST INSURANCE are associated (or correlated) with INTERNATIONAL BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL BREWERIES has no effect on the direction of SOVEREIGN TRUST i.e., SOVEREIGN TRUST and INTERNATIONAL BREWERIES go up and down completely randomly.

Pair Corralation between SOVEREIGN TRUST and INTERNATIONAL BREWERIES

Assuming the 90 days trading horizon SOVEREIGN TRUST INSURANCE is expected to generate 7.0 times more return on investment than INTERNATIONAL BREWERIES. However, SOVEREIGN TRUST is 7.0 times more volatile than INTERNATIONAL BREWERIES PLC. It trades about 0.27 of its potential returns per unit of risk. INTERNATIONAL BREWERIES PLC is currently generating about 0.0 per unit of risk. If you would invest  59.00  in SOVEREIGN TRUST INSURANCE on September 14, 2024 and sell it today you would earn a total of  22.00  from holding SOVEREIGN TRUST INSURANCE or generate 37.29% return on investment over 90 days.

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

SOVEREIGN TRUST INSURANCE  vs.  INTERNATIONAL BREWERIES PLC

SOVEREIGN TRUST INSURANCE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SOVEREIGN TRUST INSURANCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, SOVEREIGN TRUST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNATIONAL BREWERIES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with SOVEREIGN TRUST and INTERNATIONAL BREWERIES

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

The idea behind SOVEREIGN TRUST INSURANCE and INTERNATIONAL BREWERIES PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.