Correlation Between United Breweries and American Homes
Can any of the company-specific risk be diversified away by investing in both United Breweries and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on United Breweries and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and American Homes.
Diversification Opportunities for United Breweries and American Homes
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of United Breweries i.e., United Breweries and American Homes go up and down completely randomly.
Pair Corralation between United Breweries and American Homes
Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.86 times more return on investment than American Homes. However, United Breweries Co is 1.16 times less risky than American Homes. It trades about 0.24 of its potential returns per unit of risk. American Homes 4 is currently generating about -0.01 per unit of risk. If you would invest 1,030 in United Breweries Co on September 24, 2024 and sell it today you would earn a total of 70.00 from holding United Breweries Co or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Breweries Co vs. American Homes 4
Performance |
| Timeline |
| United Breweries |
| American Homes 4 |
United Breweries and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and American Homes
The main advantage of trading using opposite United Breweries and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| United Breweries vs. GungHo Online Entertainment | United Breweries vs. MARKET VECTR RETAIL | United Breweries vs. Auto Trader Group | United Breweries vs. Salesforce |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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