Correlation Between Ambev SA and Orchestra BioMed

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

Diversification Opportunities for Ambev SA and Orchestra BioMed

-0.73

Correlation Coefficient

Ambev SA  Orchestra BioMed

Pay attention - limited upside

The 3 months correlation between Ambev and Orchestra is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Ambev SA i.e., Ambev SA and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Ambev SA and Orchestra BioMed

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 0.29 times more return on investment than Orchestra BioMed. However, Ambev SA ADR is 3.45 times less risky than Orchestra BioMed. It trades about 0.18 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about 0.0 per unit of risk. If you would invest  193.00  in Ambev SA ADR on December 20, 2024 and sell it today you would earn a total of  42.00  from holding Ambev SA ADR or generate 21.76% 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.  Orchestra BioMed Holdings

Ambev SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Orchestra BioMed Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orchestra BioMed Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Orchestra BioMed is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ambev SA and Orchestra BioMed

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

The idea behind Ambev SA ADR and Orchestra BioMed Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.