Correlation Between Ambev SA and ScanSource

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

Diversification Opportunities for Ambev SA and ScanSource

-0.25

Correlation Coefficient

Ambev SA  ScanSource

Very good diversification

The 3 months correlation between Ambev and ScanSource is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Ambev SA i.e., Ambev SA and ScanSource go up and down completely randomly.

Pair Corralation between Ambev SA and ScanSource

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the ScanSource. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.29 times less risky than ScanSource. The stock trades about -0.06 of its potential returns per unit of risk. The ScanSource is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,708  in ScanSource on September 15, 2024 and sell it today you would earn a total of  548.00  from holding ScanSource or generate 11.64% return on investment over 90 days.

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

Ambev SA ADR  vs.  ScanSource

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ScanSource

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ScanSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ambev SA and ScanSource

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

The idea behind Ambev SA ADR and ScanSource 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 Stocks Directory module to find actively traded stocks across global markets.