Correlation Between Carlsberg A/S and Suntory Beverage

Can any of the company-specific risk be diversified away by investing in both Carlsberg A/S and Suntory Beverage 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 Carlsberg A/S and Suntory Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carlsberg AS and Suntory Beverage Food, you can compare the effects of market volatilities on Carlsberg A/S and Suntory Beverage 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 Carlsberg A/S with a short position of Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg A/S and Suntory Beverage.

Diversification Opportunities for Carlsberg A/S and Suntory Beverage

0.65

Correlation Coefficient

Carlsberg A/S  Suntory Beverage

Poor diversification

The 3 months correlation between Carlsberg and Suntory is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food and Carlsberg A/S 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 Carlsberg AS are associated (or correlated) with Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Carlsberg A/S i.e., Carlsberg A/S and Suntory Beverage go up and down completely randomly.

Pair Corralation between Carlsberg A/S and Suntory Beverage

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the Suntory Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Carlsberg AS is 1.21 times less risky than Suntory Beverage. The stock trades about -0.04 of its potential returns per unit of risk. The Suntory Beverage Food is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,308  in Suntory Beverage Food on September 5, 2024 and sell it today you would lose (174.00) from holding Suntory Beverage Food or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Carlsberg AS  vs.  Suntory Beverage Food

Carlsberg A/S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Carlsberg A/S is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Suntory Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carlsberg A/S and Suntory Beverage

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

The idea behind Carlsberg AS and Suntory Beverage Food 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.