Correlation Between General Mills and Anheuser Busch

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

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

Diversification Opportunities for General Mills and Anheuser Busch

-0.68

Correlation Coefficient

General Mills  Anheuser Busch

Excellent diversification

The 3 months correlation between General and Anheuser is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev and General Mills 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 General Mills are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of General Mills i.e., General Mills and Anheuser Busch go up and down completely randomly.

Pair Corralation between General Mills and Anheuser Busch

Considering the 90-day investment horizon General Mills is expected to generate 0.93 times more return on investment than Anheuser Busch. However, General Mills is 1.07 times less risky than Anheuser Busch. It trades about 0.12 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.08 per unit of risk. If you would invest  6,352  in General Mills on February 8, 2024 and sell it today you would earn a total of  562.00  from holding General Mills or generate 8.85% return on investment over 90 days.

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

General Mills  vs.  Anheuser Busch Inbev

General Mills

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal forward indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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.

Pair Trading with General Mills and Anheuser Busch

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

The idea behind General Mills and Anheuser Busch Inbev 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.