Correlation Between United Breweries and COSMO FIRST

Can any of the company-specific risk be diversified away by investing in both United Breweries and COSMO FIRST 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 COSMO FIRST 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 COSMO FIRST LIMITED, you can compare the effects of market volatilities on United Breweries and COSMO FIRST 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 COSMO FIRST. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and COSMO FIRST.

Diversification Opportunities for United Breweries and COSMO FIRST

0.74

Correlation Coefficient

United Breweries  COSMO FIRST

Poor diversification

The 3 months correlation between United and COSMO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Limited and COSMO FIRST LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSMO FIRST LIMITED 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 COSMO FIRST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSMO FIRST LIMITED has no effect on the direction of United Breweries i.e., United Breweries and COSMO FIRST go up and down completely randomly.

Pair Corralation between United Breweries and COSMO FIRST

Assuming the 90 days trading horizon United Breweries Limited is expected to generate 0.56 times more return on investment than COSMO FIRST. However, United Breweries Limited is 1.79 times less risky than COSMO FIRST. It trades about 0.05 of its potential returns per unit of risk. COSMO FIRST LIMITED is currently generating about 0.03 per unit of risk. If you would invest  157,398  in United Breweries Limited on October 24, 2024 and sell it today you would earn a total of  49,052  from holding United Breweries Limited or generate 31.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

United Breweries Limited  vs.  COSMO FIRST LIMITED

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.

COSMO FIRST LIMITED

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSMO FIRST LIMITED are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, COSMO FIRST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Breweries and COSMO FIRST

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

The idea behind United Breweries Limited and COSMO FIRST 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.