Correlation Between United Breweries and Medplus Health

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

Diversification Opportunities for United Breweries and Medplus Health

0.38

Correlation Coefficient

United Breweries  Medplus Health

Weak diversification

The 3 months correlation between United and Medplus is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Limited and Medplus Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medplus Health Services 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 Medplus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medplus Health Services has no effect on the direction of United Breweries i.e., United Breweries and Medplus Health go up and down completely randomly.

Pair Corralation between United Breweries and Medplus Health

Assuming the 90 days trading horizon United Breweries Limited is expected to generate 0.87 times more return on investment than Medplus Health. However, United Breweries Limited is 1.15 times less risky than Medplus Health. It trades about -0.05 of its potential returns per unit of risk. Medplus Health Services is currently generating about -0.06 per unit of risk. If you would invest  205,275  in United Breweries Limited on December 25, 2024 and sell it today you would lose (12,795) from holding United Breweries Limited or give up 6.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

United Breweries Limited  vs.  Medplus Health Services

United Breweries

Risk-Adjusted Performance

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Medplus Health Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medplus Health Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Breweries and Medplus Health

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

The idea behind United Breweries Limited and Medplus Health Services 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.