Correlation Between Anheuser Busch and DOW

By analyzing existing cross correlation between Anheuser Busch Inbev and DOW, you can compare the effects of market volatilities on Anheuser Busch and DOW 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 Anheuser Busch with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and DOW.

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

Diversification Opportunities for Anheuser Busch and DOW

0.76
  Correlation Coefficient
Anheuser Busch Inbev
DOW

Poor diversification

The 3 months correlation between Anheuser and DOW is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev SA Sponso and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW and Anheuser Busch 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 Anheuser Busch Inbev are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Anheuser Busch i.e. Anheuser Busch and DOW go up and down completely randomly.
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Pair Corralation between Anheuser Busch and DOW

Considering the 30-days investment horizon, Anheuser Busch Inbev is expected to generate 2.07 times more return on investment than DOW. However, Anheuser Busch is 2.07 times more volatile than DOW. It trades about 0.07 of its potential returns per unit of risk. DOW is currently generating about 0.12 per unit of risk. If you would invest  4,468  in Anheuser Busch Inbev on June 3, 2020 and sell it today you would earn a total of  543.00  from holding Anheuser Busch Inbev or generate 12.15% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Anheuser Busch Inbev SA Sponso  vs.  DOW

 Performance (%) 
      Timeline 
 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.


 
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