Correlation Between INTERNATIONAL BREWERIES and NEM INSURANCE

Can any of the company-specific risk be diversified away by investing in both INTERNATIONAL BREWERIES and NEM INSURANCE 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 INTERNATIONAL BREWERIES and NEM INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INTERNATIONAL BREWERIES PLC and NEM INSURANCE PLC, you can compare the effects of market volatilities on INTERNATIONAL BREWERIES and NEM INSURANCE 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 INTERNATIONAL BREWERIES with a short position of NEM INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERNATIONAL BREWERIES and NEM INSURANCE.

Diversification Opportunities for INTERNATIONAL BREWERIES and NEM INSURANCE

0.86

Correlation Coefficient

INTERNATIONAL BREWERIES  NEM INSURANCE

Very poor diversification

The 3 months correlation between INTERNATIONAL and NEM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL BREWERIES PLC and NEM INSURANCE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEM INSURANCE PLC and INTERNATIONAL BREWERIES 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 INTERNATIONAL BREWERIES PLC are associated (or correlated) with NEM INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEM INSURANCE PLC has no effect on the direction of INTERNATIONAL BREWERIES i.e., INTERNATIONAL BREWERIES and NEM INSURANCE go up and down completely randomly.

Pair Corralation between INTERNATIONAL BREWERIES and NEM INSURANCE

Assuming the 90 days trading horizon INTERNATIONAL BREWERIES is expected to generate 1.09 times less return on investment than NEM INSURANCE. In addition to that, INTERNATIONAL BREWERIES is 1.14 times more volatile than NEM INSURANCE PLC. It trades about 0.23 of its total potential returns per unit of risk. NEM INSURANCE PLC is currently generating about 0.29 per unit of volatility. If you would invest  1,500  in NEM INSURANCE PLC on May 4, 2025 and sell it today you would earn a total of  1,040  from holding NEM INSURANCE PLC or generate 69.33% return on investment over 90 days.

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

INTERNATIONAL BREWERIES PLC  vs.  NEM INSURANCE PLC

INTERNATIONAL BREWERIES

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL BREWERIES PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, INTERNATIONAL BREWERIES showed solid returns over the last few months and may actually be approaching a breakup point.

NEM INSURANCE PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NEM INSURANCE PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, NEM INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL BREWERIES and NEM INSURANCE

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

The idea behind INTERNATIONAL BREWERIES PLC and NEM INSURANCE PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.