Correlation Between Ambev SA and Dana

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

Diversification Opportunities for Ambev SA and Dana

-0.41

Correlation Coefficient

Ambev SA  Dana

Very good diversification

The 3 months correlation between Ambev and Dana is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Ambev SA i.e., Ambev SA and Dana go up and down completely randomly.

Pair Corralation between Ambev SA and Dana

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Dana. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.33 times less risky than Dana. The stock trades about -0.1 of its potential returns per unit of risk. The Dana Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,181  in Dana Inc on October 26, 2024 and sell it today you would earn a total of  142.00  from holding Dana Inc or generate 12.02% return on investment over 90 days.

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

Ambev SA ADR  vs.  Dana Inc

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Dana Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Dana

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

The idea behind Ambev SA ADR and Dana Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.