Correlation Between British American and United Breweries
Can any of the company-specific risk be diversified away by investing in both British American and United Breweries 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 British American and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and United Breweries Co, you can compare the effects of market volatilities on British American and United Breweries 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 British American with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and United Breweries.
Diversification Opportunities for British American and United Breweries
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and United is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and British American 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 British American Tobacco are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of British American i.e., British American and United Breweries go up and down completely randomly.
Pair Corralation between British American and United Breweries
Assuming the 90 days horizon British American is expected to generate 1.26 times less return on investment than United Breweries. But when comparing it to its historical volatility, British American Tobacco is 1.16 times less risky than United Breweries. It trades about 0.39 of its potential returns per unit of risk. United Breweries Co is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 986.00 in United Breweries Co on September 14, 2024 and sell it today you would earn a total of 104.00 from holding United Breweries Co or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. United Breweries Co
Performance |
| Timeline |
| British American Tobacco |
| United Breweries |
British American and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and United Breweries
The main advantage of trading using opposite British American and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, United Breweries 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 United Breweries will offset losses from the drop in United Breweries' long position.| British American vs. United Breweries Co | British American vs. Thai Beverage Public | British American vs. National Beverage Corp | British American vs. PKSHA TECHNOLOGY INC |
| United Breweries vs. National Retail Properties | United Breweries vs. EBRO FOODS | United Breweries vs. Cal Maine Foods | United Breweries vs. MARKET VECTR RETAIL |
Check out your portfolio center.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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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