Correlation Between National Health and United Breweries
Can any of the company-specific risk be diversified away by investing in both National Health 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 National Health and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Health Investors and United Breweries Co, you can compare the effects of market volatilities on National Health 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 National Health with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Health and United Breweries.
Diversification Opportunities for National Health and United Breweries
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between National and United is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding National Health Investors and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and National Health 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 National Health Investors 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 National Health i.e., National Health and United Breweries go up and down completely randomly.
Pair Corralation between National Health and United Breweries
Assuming the 90 days trading horizon National Health is expected to generate 22.13 times less return on investment than United Breweries. In addition to that, National Health is 1.2 times more volatile than United Breweries Co. It trades about 0.0 of its total potential returns per unit of risk. United Breweries Co is currently generating about 0.13 per unit of volatility. If you would invest 1,080 in United Breweries Co on October 25, 2024 and sell it today you would earn a total of 40.00 from holding United Breweries Co or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Health Investors vs. United Breweries Co
Performance |
| Timeline |
| National Health Investors |
| United Breweries |
National Health and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Health and United Breweries
The main advantage of trading using opposite National Health and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Health 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.| National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc | National Health vs. Apple Inc |
| United Breweries vs. Wizz Air Holdings | United Breweries vs. PURETECH HEALTH PLC | United Breweries vs. Pentair plc | United Breweries vs. National Health Investors |
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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