Correlation Between Ambev SA and Delek Logistics

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

Diversification Opportunities for Ambev SA and Delek Logistics

0.59

Correlation Coefficient

Ambev SA  Delek Logistics

Very weak diversification

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

Pair Corralation between Ambev SA and Delek Logistics

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Delek Logistics. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.21 times less risky than Delek Logistics. The stock trades about -0.03 of its potential returns per unit of risk. The Delek Logistics Partners is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,129  in Delek Logistics Partners on September 3, 2024 and sell it today you would lose (134.00) from holding Delek Logistics Partners or give up 3.25% of portfolio value over 90 days.

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

Ambev SA ADR  vs.  Delek Logistics Partners

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 fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ambev SA and Delek Logistics

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

The idea behind Ambev SA ADR and Delek Logistics Partners 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.