Correlation Between Anheuser Busch and Aluminumof China
Can any of the company-specific risk be diversified away by investing in both Anheuser Busch and Aluminumof China 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 Anheuser Busch and Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anheuser Busch Inbev and Aluminum of, you can compare the effects of market volatilities on Anheuser Busch and Aluminumof China 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 Anheuser Busch with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Aluminumof China.
Diversification Opportunities for Anheuser Busch and Aluminumof China
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Anheuser and Aluminumof is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and Anheuser Busch 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 Anheuser Busch Inbev are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Aluminumof China go up and down completely randomly.
Pair Corralation between Anheuser Busch and Aluminumof China
Considering the 90-day investment horizon Anheuser Busch Inbev is expected to under-perform the Aluminumof China. But the stock apears to be less risky and, when comparing its historical volatility, Anheuser Busch Inbev is 4.15 times less risky than Aluminumof China. The stock trades about -0.02 of its potential returns per unit of risk. The Aluminum of is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Aluminum of on October 23, 2024 and sell it today you would earn a total of 9.00 from holding Aluminum of or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 78.54% |
| Values | Daily Returns |
Anheuser Busch Inbev vs. Aluminum of
Performance |
| Timeline |
| Anheuser Busch Inbev |
| Aluminumof China |
Anheuser Busch and Aluminumof China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anheuser Busch and Aluminumof China
The main advantage of trading using opposite Anheuser Busch and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch position performs unexpectedly, Aluminumof China 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 Aluminumof China will offset losses from the drop in Aluminumof China's long position.| Anheuser Busch vs. Boston Beer | Anheuser Busch vs. Molson Coors Beverage | Anheuser Busch vs. Heineken NV | Anheuser Busch vs. Ambev SA ADR |
| Aluminumof China vs. Kaiser Aluminum | Aluminumof China vs. Century Aluminum | Aluminumof China vs. Constellium Nv | Aluminumof China vs. Alcoa Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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