Correlation Between Compania Cervecerias and Titan Machinery

Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias and Titan Machinery 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 Titan Machinery 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 Titan Machinery, you can compare the effects of market volatilities on Compania Cervecerias and Titan Machinery 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 Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and Titan Machinery.

Diversification Opportunities for Compania Cervecerias and Titan Machinery

0.41

Correlation Coefficient

Compania Cervecerias  Titan Machinery

Very weak diversification

The 3 months correlation between Compania and Titan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Titan Machinery go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Titan Machinery

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.59 times more return on investment than Titan Machinery. However, Compania Cervecerias Unidas is 1.7 times less risky than Titan Machinery. It trades about 0.02 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.05 per unit of risk. If you would invest  1,086  in Compania Cervecerias Unidas on September 19, 2024 and sell it today you would earn a total of  73.00  from holding Compania Cervecerias Unidas or generate 6.72% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Titan Machinery

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 weak fundamental indicators, Compania Cervecerias may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Compania Cervecerias and Titan Machinery

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

The idea behind Compania Cervecerias Unidas and Titan Machinery 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.