Correlation Between Compania Cervecerias and Archer Daniels

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

Diversification Opportunities for Compania Cervecerias and Archer Daniels

-0.44

Correlation Coefficient

Compania Cervecerias  Archer Daniels

Very good diversification

The 3 months correlation between Compania and Archer is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Archer Daniels go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Archer Daniels

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.89 times more return on investment than Archer Daniels. However, Compania Cervecerias Unidas is 1.13 times less risky than Archer Daniels. It trades about 0.22 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.03 per unit of risk. If you would invest  1,166  in Compania Cervecerias Unidas on January 17, 2025 and sell it today you would earn a total of  365.00  from holding Compania Cervecerias Unidas or generate 31.3% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Archer Daniels Midland

Compania Cervecerias

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Compania Cervecerias unveiled solid returns over the last few months and may actually be approaching a breakup point.

Archer Daniels Midland

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Compania Cervecerias and Archer Daniels

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

The idea behind Compania Cervecerias Unidas and Archer Daniels Midland 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.