Correlation Between Britvic PLC and Arca Continental

Can any of the company-specific risk be diversified away by investing in both Britvic PLC and Arca Continental 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 Britvic PLC and Arca Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Britvic PLC ADR and Arca Continental SAB, you can compare the effects of market volatilities on Britvic PLC and Arca Continental 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 Britvic PLC with a short position of Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Britvic PLC and Arca Continental.

Diversification Opportunities for Britvic PLC and Arca Continental

0.5

Correlation Coefficient

Britvic PLC  Arca Continental

Very weak diversification

The 3 months correlation between Britvic and Arca is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Britvic PLC ADR and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB and Britvic PLC 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 Britvic PLC ADR are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Britvic PLC i.e., Britvic PLC and Arca Continental go up and down completely randomly.

Pair Corralation between Britvic PLC and Arca Continental

Assuming the 90 days horizon Britvic PLC is expected to generate 8.35 times less return on investment than Arca Continental. But when comparing it to its historical volatility, Britvic PLC ADR is 1.35 times less risky than Arca Continental. It trades about 0.01 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Arca Continental SAB on January 19, 2024 and sell it today you would earn a total of  366.00  from holding Arca Continental SAB or generate 60.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.42%
Values	Daily Returns

Britvic PLC ADR  vs.  Arca Continental SAB

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Britvic PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Britvic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Britvic PLC and Arca Continental

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

The idea behind Britvic PLC ADR and Arca Continental SAB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.