Correlation Between Investment Trust and United Breweries

Can any of the company-specific risk be diversified away by investing in both Investment Trust 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 Investment Trust 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 Investment Trust and United Breweries Limited, you can compare the effects of market volatilities on Investment Trust 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 Investment Trust with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Trust and United Breweries.

Diversification Opportunities for Investment Trust and United Breweries

-0.25

Correlation Coefficient

Investment Trust  United Breweries

Very good diversification

The 3 months correlation between Investment and United is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Investment 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 The Investment Trust 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 Investment Trust i.e., Investment Trust and United Breweries go up and down completely randomly.

Pair Corralation between Investment Trust and United Breweries

Assuming the 90 days trading horizon The Investment Trust is expected to under-perform the United Breweries. But the stock apears to be less risky and, when comparing its historical volatility, The Investment Trust is 1.04 times less risky than United Breweries. The stock trades about -0.35 of its potential returns per unit of risk. The United Breweries Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  199,935  in United Breweries Limited on October 24, 2024 and sell it today you would earn a total of  6,515  from holding United Breweries Limited or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

The Investment Trust  vs.  United Breweries Limited

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Limited are ranked lower than 4 (%) 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 Investment Trust and United Breweries

The main advantage of trading using opposite Investment Trust and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Trust 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 Investment Trust 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.