Correlation Between Anheuser Busch and Eltek

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

Diversification Opportunities for Anheuser Busch and Eltek

0.65

Correlation Coefficient

Anheuser Busch  Eltek

Poor diversification

The 3 months correlation between Anheuser and Eltek is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev and Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eltek 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 Eltek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eltek has no effect on the direction of Anheuser Busch i.e., Anheuser Busch and Eltek go up and down completely randomly.

Pair Corralation between Anheuser Busch and Eltek

Considering the 90-day investment horizon Anheuser Busch Inbev is expected to generate 0.37 times more return on investment than Eltek. However, Anheuser Busch Inbev is 2.7 times less risky than Eltek. It trades about -0.02 of its potential returns per unit of risk. Eltek 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Anheuser Busch Inbev  vs.  Eltek

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.

Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Anheuser Busch and Eltek

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

The idea behind Anheuser Busch Inbev and Eltek 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.