Correlation Between Anheuser Busch and Virgin

Can any of the company-specific risk be diversified away by investing in both Anheuser Busch and Virgin 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 Anheuser Busch and Virgin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anheuser Busch Inbev and Virgin Media Communications, you can compare the effects of market volatilities on Anheuser Busch and Virgin 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 Anheuser Busch with a short position of Virgin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Virgin.

Diversification Opportunities for Anheuser Busch and Virgin

0.51

Correlation Coefficient

Anheuser Busch  Virgin

Very weak diversification

The 3 months correlation between Anheuser and Virgin is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Virgin Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Media Communi and Anheuser Busch 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 Anheuser Busch Inbev are associated (or correlated) with Virgin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Media Communi has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Virgin go up and down completely randomly.

Pair Corralation between Anheuser Busch and Virgin

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to under-perform the Virgin. In addition to that, Anheuser Busch is 2.33 times more volatile than Virgin Media Communications. It trades about -0.16 of its total potential returns per unit of risk. Virgin Media Communications is currently generating about 0.02 per unit of volatility. If you would invest  8,600  in Virgin Media Communications on September 3, 2024 and sell it today you would earn a total of  35.00  from holding Virgin Media Communications or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Anheuser Busch Inbev  vs.  Virgin Media Communications

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Virgin Media Communi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Media Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Virgin is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anheuser Busch and Virgin

The main advantage of trading using opposite Anheuser Busch and Virgin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch position performs unexpectedly, Virgin 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 Virgin will offset losses from the drop in Virgin's long position.

The idea behind Anheuser Busch Inbev and Virgin Media Communications 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..