Correlation Between United Breweries and China Development
Can any of the company-specific risk be diversified away by investing in both United Breweries and China Development 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 China Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Breweries Co and China Development Bank, you can compare the effects of market volatilities on United Breweries and China Development 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 China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and China Development.
Diversification Opportunities for United Breweries and China Development
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and China is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and China Development Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development Bank 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 Co are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development Bank has no effect on the direction of United Breweries i.e., United Breweries and China Development go up and down completely randomly.
Pair Corralation between United Breweries and China Development
Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.33 times more return on investment than China Development. However, United Breweries Co is 3.05 times less risky than China Development. It trades about 0.22 of its potential returns per unit of risk. China Development Bank is currently generating about -0.05 per unit of risk. If you would invest 1,070 in United Breweries Co on November 4, 2024 and sell it today you would earn a total of 80.00 from holding United Breweries Co or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Breweries Co vs. China Development Bank
Performance |
| Timeline |
| United Breweries |
| China Development Bank |
United Breweries and China Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and China Development
The main advantage of trading using opposite United Breweries and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, China Development 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 China Development will offset losses from the drop in China Development's long position.| United Breweries vs. SENECA FOODS A | United Breweries vs. Suntory Beverage Food | United Breweries vs. Molson Coors Beverage | United Breweries vs. Thai Beverage Public |
| China Development vs. Apple Inc | China Development vs. Apple Inc | China Development vs. Apple Inc | China Development vs. Apple Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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