Correlation Between Ambev SA and Catalent

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

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

Diversification Opportunities for Ambev SA and Catalent

-0.18

Correlation Coefficient

Ambev SA  Catalent

Good diversification

The 3 months correlation between Ambev and Catalent is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent and Ambev SA 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 Ambev SA ADR are associated (or correlated) with Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Ambev SA i.e., Ambev SA and Catalent go up and down completely randomly.

Pair Corralation between Ambev SA and Catalent

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Catalent. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.88 times less risky than Catalent. The stock trades about -0.01 of its potential returns per unit of risk. The Catalent is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,545  in Catalent on September 23, 2024 and sell it today you would earn a total of  1,803  from holding Catalent or generate 39.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Ambev SA ADR  vs.  Catalent

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ambev SA and Catalent

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

The idea behind Ambev SA ADR and Catalent 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.