Correlation Between Ambev SA and ENEL Societa

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

Diversification Opportunities for Ambev SA and ENEL Societa

0.56

Correlation Coefficient

Ambev SA  ENEL Societa

Very weak diversification

The 3 months correlation between Ambev and ENEL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and ENEL Societa per in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEL Societa per 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 ENEL Societa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEL Societa per has no effect on the direction of Ambev SA i.e., Ambev SA and ENEL Societa go up and down completely randomly.

Pair Corralation between Ambev SA and ENEL Societa

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the ENEL Societa. In addition to that, Ambev SA is 1.29 times more volatile than ENEL Societa per. It trades about -0.02 of its total potential returns per unit of risk. ENEL Societa per is currently generating about 0.05 per unit of volatility. If you would invest  535.00  in ENEL Societa per on October 11, 2024 and sell it today you would earn a total of  183.00  from holding ENEL Societa per or generate 34.21% return on investment over 90 days.

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

Ambev SA ADR  vs.  ENEL Societa per

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.

ENEL Societa per

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEL Societa per has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ambev SA and ENEL Societa

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

The idea behind Ambev SA ADR and ENEL Societa per 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.