Correlation Between United Breweries and Chambal Fertilizers

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

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

Diversification Opportunities for United Breweries and Chambal Fertilizers

0.45

Correlation Coefficient

United Breweries  Chambal Fertilizers

Very weak diversification

The 3 months correlation between United and Chambal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Limited and Chambal Fertilizers Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chambal Fertilizers and United Breweries 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 United Breweries Limited are associated (or correlated) with Chambal Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chambal Fertilizers has no effect on the direction of United Breweries i.e., United Breweries and Chambal Fertilizers go up and down completely randomly.

Pair Corralation between United Breweries and Chambal Fertilizers

Assuming the 90 days trading horizon United Breweries is expected to generate 2.14 times less return on investment than Chambal Fertilizers. But when comparing it to its historical volatility, United Breweries Limited is 1.71 times less risky than Chambal Fertilizers. It trades about 0.05 of its potential returns per unit of risk. Chambal Fertilizers Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  29,174  in Chambal Fertilizers Chemicals on October 10, 2024 and sell it today you would earn a total of  21,041  from holding Chambal Fertilizers Chemicals or generate 72.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.38%
Values	Daily Returns

United Breweries Limited  vs.  Chambal Fertilizers Chemicals

United Breweries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chambal Fertilizers

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chambal Fertilizers Chemicals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Chambal Fertilizers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Breweries and Chambal Fertilizers

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

The idea behind United Breweries Limited and Chambal Fertilizers Chemicals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.