Correlation Between Ambev SA and Lancaster Colony

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

Diversification Opportunities for Ambev SA and Lancaster Colony

0.24

Correlation Coefficient

Ambev SA  Lancaster Colony

Modest diversification

The 3 months correlation between Ambev and Lancaster is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony 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 Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Ambev SA i.e., Ambev SA and Lancaster Colony go up and down completely randomly.

Pair Corralation between Ambev SA and Lancaster Colony

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 1.04 times more return on investment than Lancaster Colony. However, Ambev SA is 1.04 times more volatile than Lancaster Colony. It trades about 0.2 of its potential returns per unit of risk. Lancaster Colony is currently generating about 0.02 per unit of risk. If you would invest  183.00  in Ambev SA ADR on December 30, 2024 and sell it today you would earn a total of  45.00  from holding Ambev SA ADR or generate 24.59% return on investment over 90 days.

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

Ambev SA ADR  vs.  Lancaster Colony

Ambev SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Lancaster Colony

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ambev SA and Lancaster Colony

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

The idea behind Ambev SA ADR and Lancaster Colony 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.