Correlation Between United Breweries and STMICROELECTRONICS

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Can any of the company-specific risk be diversified away by investing in both United Breweries and STMICROELECTRONICS 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 STMICROELECTRONICS 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 STMICROELECTRONICS, you can compare the effects of market volatilities on United Breweries and STMICROELECTRONICS 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 STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Breweries and STMICROELECTRONICS.

Diversification Opportunities for United Breweries and STMICROELECTRONICS

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between United and STMICROELECTRONICS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding United Breweries Co and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS 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 STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of United Breweries i.e., United Breweries and STMICROELECTRONICS go up and down completely randomly.

Pair Corralation between United Breweries and STMICROELECTRONICS

Assuming the 90 days trading horizon United Breweries Co is expected to generate 0.84 times more return on investment than STMICROELECTRONICS. However, United Breweries Co is 1.19 times less risky than STMICROELECTRONICS. It trades about -0.01 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.02 per unit of risk. If you would invest  1,248  in United Breweries Co on October 11, 2024 and sell it today you would lose (158.00) from holding United Breweries Co or give up 12.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

United Breweries Co  vs.  STMICROELECTRONICS

 Performance 
       Timeline  
United Breweries 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, United Breweries may actually be approaching a critical reversion point that can send shares even higher in February 2025.
STMICROELECTRONICS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

United Breweries and STMICROELECTRONICS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Breweries and STMICROELECTRONICS

The main advantage of trading using opposite United Breweries and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Breweries position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.
The idea behind United Breweries Co and STMICROELECTRONICS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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