Correlation Between GungHo Online and United Breweries

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

By analyzing existing cross correlation between GungHo Online Entertainment and United Breweries Co, you can compare the effects of market volatilities on GungHo Online and United Breweries 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 GungHo Online with a short position of United Breweries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GungHo Online and United Breweries.

Diversification Opportunities for GungHo Online and United Breweries

0.01

Correlation Coefficient

GungHo Online  United Breweries

Significant diversification

The 3 months correlation between GungHo and United is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding GungHo Online Entertainment and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and GungHo Online 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 GungHo Online Entertainment are associated (or correlated) with United Breweries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Breweries has no effect on the direction of GungHo Online i.e., GungHo Online and United Breweries go up and down completely randomly.

Pair Corralation between GungHo Online and United Breweries

Assuming the 90 days horizon GungHo Online Entertainment is expected to generate 1.52 times more return on investment than United Breweries. However, GungHo Online is 1.52 times more volatile than United Breweries Co. It trades about 0.18 of its potential returns per unit of risk. United Breweries Co is currently generating about 0.24 per unit of risk. If you would invest  1,790  in GungHo Online Entertainment on September 24, 2024 and sell it today you would earn a total of  140.00  from holding GungHo Online Entertainment or generate 7.82% return on investment over 90 days.

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

GungHo Online Entertainment  vs.  United Breweries Co

GungHo Online Entert

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GungHo Online Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GungHo Online is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

United Breweries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, United Breweries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GungHo Online and United Breweries

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

The idea behind GungHo Online Entertainment and United Breweries Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.