Correlation Between United Breweries and Credo Brands

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

Diversification Opportunities for United Breweries and Credo Brands

0.55

Correlation Coefficient

United Breweries  Credo Brands

Very weak diversification

The 3 months correlation between United and Credo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Limited and Credo Brands Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Brands Marketing 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 Credo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Brands Marketing has no effect on the direction of United Breweries i.e., United Breweries and Credo Brands go up and down completely randomly.

Pair Corralation between United Breweries and Credo Brands

Assuming the 90 days trading horizon United Breweries Limited is expected to generate 0.48 times more return on investment than Credo Brands. However, United Breweries Limited is 2.09 times less risky than Credo Brands. It trades about 0.04 of its potential returns per unit of risk. Credo Brands Marketing is currently generating about -0.06 per unit of risk. If you would invest  160,423  in United Breweries Limited on October 4, 2024 and sell it today you would earn a total of  43,277  from holding United Breweries Limited or generate 26.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	51.75%
Values	Daily Returns

United Breweries Limited  vs.  Credo Brands Marketing

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

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Credo Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Breweries and Credo Brands

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

The idea behind United Breweries Limited and Credo Brands Marketing 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.