Correlation Between Visa and United Breweries

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Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and United Breweries Limited, you can compare the effects of market volatilities on Visa 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 Visa with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and United Breweries.

Diversification Opportunities for Visa and United Breweries

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Visa and United is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and United Breweries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and Visa 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 Visa Class A 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 Visa i.e., Visa and United Breweries go up and down completely randomly.

Pair Corralation between Visa and United Breweries

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.91 times more return on investment than United Breweries. However, Visa Class A is 1.1 times less risky than United Breweries. It trades about 0.17 of its potential returns per unit of risk. United Breweries Limited is currently generating about -0.07 per unit of risk. If you would invest  27,379  in Visa Class A on August 29, 2024 and sell it today you would earn a total of  3,803  from holding Visa Class A or generate 13.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy96.88%
ValuesDaily Returns

Visa Class A  vs.  United Breweries Limited

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.
United Breweries 

Risk-Adjusted Performance

0 of 100

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

Visa and United Breweries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and United Breweries

The main advantage of trading using opposite Visa and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and United Breweries Limited 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.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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