Correlation Between Molson Coors and Budweiser Brewing

Can any of the company-specific risk be diversified away by investing in both Molson Coors and Budweiser Brewing 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 Molson Coors and Budweiser Brewing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Molson Coors Beverage and Budweiser Brewing, you can compare the effects of market volatilities on Molson Coors and Budweiser Brewing 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 Molson Coors with a short position of Budweiser Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Budweiser Brewing.

Diversification Opportunities for Molson Coors and Budweiser Brewing

0.6

Correlation Coefficient

Molson Coors  Budweiser Brewing

Poor diversification

The 3 months correlation between Molson and Budweiser is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and Budweiser Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budweiser Brewing and Molson Coors 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 Molson Coors Beverage are associated (or correlated) with Budweiser Brewing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budweiser Brewing has no effect on the direction of Molson Coors i.e., Molson Coors and Budweiser Brewing go up and down completely randomly.

Pair Corralation between Molson Coors and Budweiser Brewing

Assuming the 90 days horizon Molson Coors is expected to generate 4.96 times less return on investment than Budweiser Brewing. But when comparing it to its historical volatility, Molson Coors Beverage is 1.27 times less risky than Budweiser Brewing. It trades about 0.04 of its potential returns per unit of risk. Budweiser Brewing is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Budweiser Brewing on December 30, 2024 and sell it today you would earn a total of  33.00  from holding Budweiser Brewing or generate 36.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Molson Coors Beverage  vs.  Budweiser Brewing

Molson Coors Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Budweiser Brewing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Budweiser Brewing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Budweiser Brewing reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molson Coors and Budweiser Brewing

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

The idea behind Molson Coors Beverage and Budweiser Brewing 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.