Correlation Between Ambev SA and Nextracker

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

Diversification Opportunities for Ambev SA and Nextracker

-0.44

Correlation Coefficient

Ambev SA  Nextracker

Very good diversification

The 3 months correlation between Ambev and Nextracker is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A 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 Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of Ambev SA i.e., Ambev SA and Nextracker go up and down completely randomly.

Pair Corralation between Ambev SA and Nextracker

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 0.46 times more return on investment than Nextracker. However, Ambev SA ADR is 2.19 times less risky than Nextracker. It trades about -0.03 of its potential returns per unit of risk. Nextracker Class A is currently generating about -0.02 per unit of risk. If you would invest  241.00  in Ambev SA ADR on December 5, 2024 and sell it today you would lose (32.00) from holding Ambev SA ADR or give up 13.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Ambev SA ADR  vs.  Nextracker Class A

Ambev SA ADR

Risk-Adjusted Performance

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.

Nextracker Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Nextracker unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Nextracker

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

The idea behind Ambev SA ADR and Nextracker Class A 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 Valuation module to check real value of public entities based on technical and fundamental data.