Correlation Between United Breweries and Ravi Kumar

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

Diversification Opportunities for United Breweries and Ravi Kumar

0.38

Correlation Coefficient

United Breweries  Ravi Kumar

Weak diversification

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

Pair Corralation between United Breweries and Ravi Kumar

Assuming the 90 days trading horizon United Breweries Limited is expected to generate 1.19 times more return on investment than Ravi Kumar. However, United Breweries is 1.19 times more volatile than Ravi Kumar Distilleries. It trades about 0.02 of its potential returns per unit of risk. Ravi Kumar Distilleries is currently generating about -0.17 per unit of risk. If you would invest  205,275  in United Breweries Limited on October 25, 2024 and sell it today you would earn a total of  1,125  from holding United Breweries Limited or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

United Breweries Limited  vs.  Ravi Kumar Distilleries

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.

Ravi Kumar Distilleries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ravi Kumar Distilleries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ravi Kumar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Breweries and Ravi Kumar

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

The idea behind United Breweries Limited and Ravi Kumar Distilleries 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.