Correlation Between Ambev SA and Li Auto
Can any of the company-specific risk be diversified away by investing in both Ambev SA and Li Auto 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 Li Auto 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 Li Auto, you can compare the effects of market volatilities on Ambev SA and Li Auto 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 Li Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Li Auto.
Diversification Opportunities for Ambev SA and Li Auto
Very weak diversification
The 3 months correlation between Ambev and Li Auto is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Li Auto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Auto 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 Li Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Auto has no effect on the direction of Ambev SA i.e., Ambev SA and Li Auto go up and down completely randomly.
Pair Corralation between Ambev SA and Li Auto
Given the investment horizon of 90 days Ambev SA is expected to generate 1.1 times less return on investment than Li Auto. But when comparing it to its historical volatility, Ambev SA ADR is 2.25 times less risky than Li Auto. It trades about 0.19 of its potential returns per unit of risk. Li Auto is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,276 in Li Auto on December 18, 2024 and sell it today you would earn a total of 459.00 from holding Li Auto or generate 20.17% 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. Li Auto
Performance |
Timeline |
Ambev SA ADR |
Li Auto |
Ambev SA and Li Auto Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ambev SA and Li Auto
The main advantage of trading using opposite Ambev SA and Li Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Li Auto 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 Li Auto will offset losses from the drop in Li Auto's long position.Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Boston Beer | Ambev SA vs. Carlsberg AS | Ambev SA vs. Compania Cervecerias Unidas |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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