Correlation Between MRF and United Breweries

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

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

Diversification Opportunities for MRF and United Breweries

-0.59

Correlation Coefficient

MRF  United Breweries

Excellent diversification

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

Pair Corralation between MRF and United Breweries

Assuming the 90 days trading horizon MRF Limited is expected to generate 1.12 times more return on investment than United Breweries. However, MRF is 1.12 times more volatile than United Breweries Limited. It trades about 0.19 of its potential returns per unit of risk. United Breweries Limited is currently generating about -0.06 per unit of risk. If you would invest  12,845,900  in MRF Limited on April 25, 2025 and sell it today you would earn a total of  2,145,600  from holding MRF Limited or generate 16.7% return on investment over 90 days.

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

MRF Limited  vs.  United Breweries Limited

MRF Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MRF Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, MRF exhibited solid returns over the last few months and may actually be approaching a breakup point.

United Breweries

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, United Breweries is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MRF and United Breweries

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

The idea behind MRF Limited and United Breweries Limited 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 Stocks Directory module to find actively traded stocks across global markets.