Correlation Between UNITED UTILITIES and United Breweries
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and United Breweries 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 UTILITIES and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED UTILITIES GR and United Breweries Co, you can compare the effects of market volatilities on UNITED UTILITIES and United Breweries 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 UTILITIES with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and United Breweries.
Diversification Opportunities for UNITED UTILITIES and United Breweries
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UNITED and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and UNITED UTILITIES 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 UTILITIES GR are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and United Breweries go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and United Breweries
Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the United Breweries. But the stock apears to be less risky and, when comparing its historical volatility, UNITED UTILITIES GR is 1.3 times less risky than United Breweries. The stock trades about -0.35 of its potential returns per unit of risk. The United Breweries Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,060 in United Breweries Co on October 1, 2024 and sell it today you would earn a total of 20.00 from holding United Breweries Co or generate 1.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. United Breweries Co
Performance |
| Timeline |
| UNITED UTILITIES |
| United Breweries |
UNITED UTILITIES and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and United Breweries
The main advantage of trading using opposite UNITED UTILITIES and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, United Breweries 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 United Breweries will offset losses from the drop in United Breweries' long position.The idea behind UNITED UTILITIES GR and United Breweries Co 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.| United Breweries vs. INDO RAMA SYNTHETIC | United Breweries vs. SEKISUI CHEMICAL | United Breweries vs. Mitsui Chemicals | United Breweries vs. GRUPO CARSO A1 |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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