Correlation Between United Breweries and Cambridge Technology

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

Diversification Opportunities for United Breweries and Cambridge Technology

0.74

Correlation Coefficient

United Breweries  Cambridge Technology

Poor diversification

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

Pair Corralation between United Breweries and Cambridge Technology

Assuming the 90 days trading horizon United Breweries Limited is expected to generate 0.49 times more return on investment than Cambridge Technology. However, United Breweries Limited is 2.04 times less risky than Cambridge Technology. It trades about 0.05 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.0 per unit of risk. If you would invest  198,360  in United Breweries Limited on October 25, 2024 and sell it today you would earn a total of  8,040  from holding United Breweries Limited or generate 4.05% return on investment over 90 days.

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

United Breweries Limited  vs.  Cambridge Technology Enterpris

United Breweries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Limited are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with United Breweries and Cambridge Technology

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

The idea behind United Breweries Limited and Cambridge Technology Enterprises 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.