Correlation Between State Bank and United Breweries

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

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

Diversification Opportunities for State Bank and United Breweries

0.63

Correlation Coefficient

State Bank  United Breweries

Poor diversification

The 3 months correlation between State and United is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and United Breweries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Breweries and State Bank 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 State Bank of 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 State Bank i.e., State Bank and United Breweries go up and down completely randomly.

Pair Corralation between State Bank and United Breweries

Assuming the 90 days horizon State Bank is expected to generate 1.89 times less return on investment than United Breweries. In addition to that, State Bank is 1.03 times more volatile than United Breweries Co. It trades about 0.06 of its total potential returns per unit of risk. United Breweries Co is currently generating about 0.12 per unit of volatility. If you would invest  927.00  in United Breweries Co on September 5, 2024 and sell it today you would earn a total of  133.00  from holding United Breweries Co or generate 14.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

State Bank of  vs.  United Breweries Co

State Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Breweries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Breweries Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Breweries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and United Breweries

The main advantage of trading using opposite State Bank and United Breweries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank 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 State Bank of 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.