Correlation Between EI Du and Compania Cervecerias

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

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

Diversification Opportunities for EI Du and Compania Cervecerias

-0.38

Correlation Coefficient

EI Du  Compania Cervecerias

Very good diversification

The 3 months correlation between CTA-P-A and Compania is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding EI du Pont and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and EI Du 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 EI du Pont are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of EI Du i.e., EI Du and Compania Cervecerias go up and down completely randomly.

Pair Corralation between EI Du and Compania Cervecerias

Assuming the 90 days trading horizon EI du Pont is expected to under-perform the Compania Cervecerias. In addition to that, EI Du is 1.46 times more volatile than Compania Cervecerias Unidas. It trades about -0.17 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about -0.01 per unit of volatility. If you would invest  1,163  in Compania Cervecerias Unidas on September 29, 2024 and sell it today you would lose (13.00) from holding Compania Cervecerias Unidas or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.25%
Values	Daily Returns

EI du Pont  vs.  Compania Cervecerias Unidas

EI du Pont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EI du Pont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compania Cervecerias

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania Cervecerias Unidas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EI Du and Compania Cervecerias

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

The idea behind EI du Pont and Compania Cervecerias Unidas 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.