Correlation Between United Breweries and 3M
Can any of the company-specific risk be diversified away by investing in both United Breweries and 3M 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 3M 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 3M Company, you can compare the effects of market volatilities on United Breweries and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and 3M.
Diversification Opportunities for United Breweries and 3M
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and 3M is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of United Breweries i.e., United Breweries and 3M go up and down completely randomly.
Pair Corralation between United Breweries and 3M
Assuming the 90 days trading horizon United Breweries Co is expected to under-perform the 3M. But the stock apears to be less risky and, when comparing its historical volatility, United Breweries Co is 1.2 times less risky than 3M. The stock trades about -0.02 of its potential returns per unit of risk. The 3M Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,625 in 3M Company on September 12, 2024 and sell it today you would earn a total of 3,677 from holding 3M Company or generate 42.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Breweries Co vs. 3M Company
Performance |
| Timeline |
| United Breweries |
| 3M Company |
United Breweries and 3M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and 3M
The main advantage of trading using opposite United Breweries and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.| United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc |
| 3M vs. Schneider Electric SE | 3M vs. Superior Plus Corp | 3M vs. SIVERS SEMICONDUCTORS AB | 3M vs. Norsk Hydro ASA |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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