Correlation Between NTG Nordic and United Breweries

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

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

Diversification Opportunities for NTG Nordic and United Breweries

-0.62

Correlation Coefficient

NTG Nordic  United Breweries

Excellent diversification

The 3 months correlation between NTG and United is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and NTG Nordic 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 NTG Nordic Transport 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 NTG Nordic i.e., NTG Nordic and United Breweries go up and down completely randomly.

Pair Corralation between NTG Nordic and United Breweries

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the United Breweries. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.41 times less risky than United Breweries. The stock trades about -0.6 of its potential returns per unit of risk. The United Breweries Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,030  in United Breweries Co on September 24, 2024 and sell it today you would earn a total of  70.00  from holding United Breweries Co or generate 6.8% return on investment over 90 days.

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

NTG Nordic Transport  vs.  United Breweries Co

NTG Nordic Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 NTG Nordic and United Breweries

The main advantage of trading using opposite NTG Nordic and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTG Nordic 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 NTG Nordic Transport 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.