Correlation Between United Breweries and CME
Can any of the company-specific risk be diversified away by investing in both United Breweries and CME 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 CME 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 CME Group, you can compare the effects of market volatilities on United Breweries and CME 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 CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and CME.
Diversification Opportunities for United Breweries and CME
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and CME is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group 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 CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of United Breweries i.e., United Breweries and CME go up and down completely randomly.
Pair Corralation between United Breweries and CME
Assuming the 90 days trading horizon United Breweries Co is expected to generate 1.04 times more return on investment than CME. However, United Breweries is 1.04 times more volatile than CME Group. It trades about 0.29 of its potential returns per unit of risk. CME Group is currently generating about 0.28 per unit of risk. If you would invest 986.00 in United Breweries Co on September 12, 2024 and sell it today you would earn a total of 74.00 from holding United Breweries Co or generate 7.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
United Breweries Co vs. CME Group
Performance |
| Timeline |
| United Breweries |
| CME Group |
United Breweries and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Breweries and CME
The main advantage of trading using opposite United Breweries and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, CME 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 CME will offset losses from the drop in CME's long position.| United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries vs. Apple Inc | United Breweries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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