Correlation Between Ambev SA and Philip Morris

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

Diversification Opportunities for Ambev SA and Philip Morris

-0.08

Correlation Coefficient

Ambev SA  Philip Morris

Good diversification

The 3 months correlation between Ambev and Philip is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Ambev SA i.e., Ambev SA and Philip Morris go up and down completely randomly.

Pair Corralation between Ambev SA and Philip Morris

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Philip Morris. In addition to that, Ambev SA is 2.37 times more volatile than Philip Morris International. It trades about -0.38 of its total potential returns per unit of risk. Philip Morris International is currently generating about -0.27 per unit of volatility. If you would invest  12,730  in Philip Morris International on October 9, 2024 and sell it today you would lose (590.00) from holding Philip Morris International or give up 4.63% of portfolio value over 90 days.

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

Ambev SA ADR  vs.  Philip Morris International

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.

Philip Morris Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ambev SA and Philip Morris

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

The idea behind Ambev SA ADR and Philip Morris International 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.