Correlation Between Anheuser Busch and Vita Coco

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

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

Diversification Opportunities for Anheuser Busch and Vita Coco

-0.59

Correlation Coefficient

Anheuser Busch  Vita Coco

Excellent diversification

The 3 months correlation between Anheuser and Vita is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Vita Coco go up and down completely randomly.

Pair Corralation between Anheuser Busch and Vita Coco

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to generate 0.53 times more return on investment than Vita Coco. However, Anheuser Busch Inbev is 1.9 times less risky than Vita Coco. It trades about -0.02 of its potential returns per unit of risk. Vita Coco is currently generating about -0.12 per unit of risk. If you would invest  5,978  in Anheuser Busch Inbev on January 24, 2024 and sell it today you would lose (29.00) from holding Anheuser Busch Inbev or give up 0.49% of portfolio value over 90 days.

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

Anheuser Busch Inbev  vs.  Vita Coco

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Anheuser Busch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vita Coco

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Anheuser Busch and Vita Coco

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

The idea behind Anheuser Busch Inbev and Vita Coco 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.