Correlation Between Ambev SA and 126650BR0

Can any of the company-specific risk be diversified away by investing in both Ambev SA and 126650BR0 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 126650BR0 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 CVS HEALTH P, you can compare the effects of market volatilities on Ambev SA and 126650BR0 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 126650BR0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and 126650BR0.

Diversification Opportunities for Ambev SA and 126650BR0

0.56

Correlation Coefficient

Ambev SA  126650BR0

Very weak diversification

The 3 months correlation between Ambev and 126650BR0 is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and CVS HEALTH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH P 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 126650BR0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH P has no effect on the direction of Ambev SA i.e., Ambev SA and 126650BR0 go up and down completely randomly.

Pair Corralation between Ambev SA and 126650BR0

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 1.21 times more return on investment than 126650BR0. However, Ambev SA is 1.21 times more volatile than CVS HEALTH P. It trades about 0.05 of its potential returns per unit of risk. CVS HEALTH P is currently generating about 0.01 per unit of risk. If you would invest  211.00  in Ambev SA ADR on September 12, 2024 and sell it today you would earn a total of  21.00  from holding Ambev SA ADR or generate 9.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.8%
Values	Daily Returns

Ambev SA ADR  vs.  CVS HEALTH P

Ambev SA ADR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CVS HEALTH P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 126650BR0 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ambev SA and 126650BR0

The main advantage of trading using opposite Ambev SA and 126650BR0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, 126650BR0 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 126650BR0 will offset losses from the drop in 126650BR0's long position.

The idea behind Ambev SA ADR and CVS HEALTH P 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.