Correlation Between Compania Cervecerias and JBDI Holdings

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

By analyzing existing cross correlation between Compania Cervecerias Unidas and JBDI Holdings Limited, you can compare the effects of market volatilities on Compania Cervecerias and JBDI Holdings 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 Compania Cervecerias with a short position of JBDI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and JBDI Holdings.

Diversification Opportunities for Compania Cervecerias and JBDI Holdings

-0.24

Correlation Coefficient

Compania Cervecerias  JBDI Holdings

Very good diversification

The 3 months correlation between Compania and JBDI is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and JBDI Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBDI Holdings Limited and Compania Cervecerias 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 Compania Cervecerias Unidas are associated (or correlated) with JBDI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBDI Holdings Limited has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and JBDI Holdings go up and down completely randomly.

Pair Corralation between Compania Cervecerias and JBDI Holdings

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.3 times more return on investment than JBDI Holdings. However, Compania Cervecerias Unidas is 3.31 times less risky than JBDI Holdings. It trades about 0.02 of its potential returns per unit of risk. JBDI Holdings Limited is currently generating about -0.3 per unit of risk. If you would invest  1,155  in Compania Cervecerias Unidas on September 22, 2024 and sell it today you would earn a total of  12.00  from holding Compania Cervecerias Unidas or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Compania Cervecerias Unidas  vs.  JBDI Holdings Limited

Compania Cervecerias

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JBDI Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBDI Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Compania Cervecerias and JBDI Holdings

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

The idea behind Compania Cervecerias Unidas and JBDI Holdings 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.