Correlation Between United Breweries and British American
Can any of the company-specific risk be diversified away by investing in both United Breweries and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on United Breweries and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and British American.
Diversification Opportunities for United Breweries and British American
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and British is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of United Breweries i.e., United Breweries and British American go up and down completely randomly.
Pair Corralation between United Breweries and British American
Assuming the 90 days trading horizon United Breweries Co is expected to generate 1.29 times more return on investment than British American. However, United Breweries is 1.29 times more volatile than British American Tobacco. It trades about 0.46 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.35 per unit of risk. If you would invest 986.00 in United Breweries Co on September 15, 2024 and sell it today you would earn a total of 114.00 from holding United Breweries Co or generate 11.56% 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. British American Tobacco
Performance |
| Timeline |
| United Breweries |
| British American Tobacco |
United Breweries and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and British American
The main advantage of trading using opposite United Breweries and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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