Correlation Between Ambev SA and Thai Beverage

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

Diversification Opportunities for Ambev SA and Thai Beverage

0.0

Correlation Coefficient

Ambev SA  Thai Beverage

Pay attention - limited upside

The 3 months correlation between Ambev and Thai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Thai Beverage PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage PCL 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage PCL has no effect on the direction of Ambev SA i.e., Ambev SA and Thai Beverage go up and down completely randomly.

Pair Corralation between Ambev SA and Thai Beverage

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 0.81 times more return on investment than Thai Beverage. However, Ambev SA ADR is 1.24 times less risky than Thai Beverage. It trades about -0.02 of its potential returns per unit of risk. Thai Beverage PCL is currently generating about -0.06 per unit of risk. If you would invest  258.00  in Ambev SA ADR on September 2, 2024 and sell it today you would lose (46.00) from holding Ambev SA ADR or give up 17.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	60.28%
Values	Daily Returns

Ambev SA ADR  vs.  Thai Beverage PCL

Ambev SA ADR

Risk-Adjusted Performance

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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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Thai Beverage PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Beverage PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Thai Beverage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ambev SA and Thai Beverage

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

The idea behind Ambev SA ADR and Thai Beverage PCL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..