Correlation Between Ambev SA and Flagship Communities

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

Diversification Opportunities for Ambev SA and Flagship Communities

0.07

Correlation Coefficient

Ambev SA  Flagship Communities

Significant diversification

The 3 months correlation between Ambev and Flagship is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Flagship Communities Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flagship Communities Real 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 Flagship Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flagship Communities Real has no effect on the direction of Ambev SA i.e., Ambev SA and Flagship Communities go up and down completely randomly.

Pair Corralation between Ambev SA and Flagship Communities

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Flagship Communities. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.2 times less risky than Flagship Communities. The stock trades about -0.02 of its potential returns per unit of risk. The Flagship Communities Real is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,489  in Flagship Communities Real on October 11, 2024 and sell it today you would lose (4.00) from holding Flagship Communities Real or give up 0.27% of portfolio value over 90 days.

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

Ambev SA ADR  vs.  Flagship Communities Real

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.

Flagship Communities Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flagship Communities Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Flagship Communities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ambev SA and Flagship Communities

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

The idea behind Ambev SA ADR and Flagship Communities Real 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.