Correlation Between CHINA HUARONG and United Breweries
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG 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 CHINA HUARONG and United Breweries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and United Breweries Co, you can compare the effects of market volatilities on CHINA HUARONG 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 CHINA HUARONG with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and United Breweries.
Diversification Opportunities for CHINA HUARONG and United Breweries
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and United is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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 CHINA HUARONG i.e., CHINA HUARONG and United Breweries go up and down completely randomly.
Pair Corralation between CHINA HUARONG and United Breweries
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 15.35 times more return on investment than United Breweries. However, CHINA HUARONG is 15.35 times more volatile than United Breweries Co. It trades about 0.09 of its potential returns per unit of risk. United Breweries Co is currently generating about -0.01 per unit of risk. If you would invest 0.45 in CHINA HUARONG ENERHD 50 on September 3, 2024 and sell it today you would lose (0.30) from holding CHINA HUARONG ENERHD 50 or give up 66.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. United Breweries Co
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| United Breweries |
CHINA HUARONG and United Breweries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and United Breweries
The main advantage of trading using opposite CHINA HUARONG and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG 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.| CHINA HUARONG vs. Waste Management | CHINA HUARONG vs. National Health Investors | CHINA HUARONG vs. Apollo Investment Corp | CHINA HUARONG vs. FEMALE HEALTH |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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