Correlation Between Ambev SA and FTAI Aviation

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

Diversification Opportunities for Ambev SA and FTAI Aviation

-0.7

Correlation Coefficient

Ambev SA  FTAI Aviation

Excellent diversification

The 3 months correlation between Ambev and FTAI is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and FTAI Aviation Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Aviation 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 FTAI Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Aviation has no effect on the direction of Ambev SA i.e., Ambev SA and FTAI Aviation go up and down completely randomly.

Pair Corralation between Ambev SA and FTAI Aviation

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the FTAI Aviation. In addition to that, Ambev SA is 2.24 times more volatile than FTAI Aviation Ltd. It trades about -0.01 of its total potential returns per unit of risk. FTAI Aviation Ltd is currently generating about 0.14 per unit of volatility. If you would invest  2,486  in FTAI Aviation Ltd on September 1, 2024 and sell it today you would earn a total of  302.00  from holding FTAI Aviation Ltd or generate 12.15% return on investment over 90 days.

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

Ambev SA ADR  vs.  FTAI Aviation Ltd

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.

FTAI Aviation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Aviation Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, FTAI Aviation may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ambev SA and FTAI Aviation

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

The idea behind Ambev SA ADR and FTAI Aviation Ltd 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.