Correlation Between Ambev SA and Renault SA

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

Diversification Opportunities for Ambev SA and Renault SA

-0.42

Correlation Coefficient

Ambev SA  Renault SA

Very good diversification

The 3 months correlation between Ambev and Renault is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Ambev SA i.e., Ambev SA and Renault SA go up and down completely randomly.

Pair Corralation between Ambev SA and Renault SA

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Renault SA. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.67 times less risky than Renault SA. The stock trades about -0.62 of its potential returns per unit of risk. The Renault SA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,293  in Renault SA on October 6, 2024 and sell it today you would earn a total of  547.00  from holding Renault SA or generate 12.74% return on investment over 90 days.

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

Ambev SA ADR  vs.  Renault SA

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.

Renault SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Renault SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Renault SA

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

The idea behind Ambev SA ADR and Renault SA 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.