Correlation Between Ambev SA and 48203RAM6

Can any of the company-specific risk be diversified away by investing in both Ambev SA and 48203RAM6 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 48203RAM6 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 US48203RAM60, you can compare the effects of market volatilities on Ambev SA and 48203RAM6 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 48203RAM6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and 48203RAM6.

Diversification Opportunities for Ambev SA and 48203RAM6

0.45

Correlation Coefficient

Ambev SA  48203RAM6

Very weak diversification

The 3 months correlation between Ambev and 48203RAM6 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and US48203RAM60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US48203RAM60 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 48203RAM6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US48203RAM60 has no effect on the direction of Ambev SA i.e., Ambev SA and 48203RAM6 go up and down completely randomly.

Pair Corralation between Ambev SA and 48203RAM6

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the 48203RAM6. In addition to that, Ambev SA is 7.01 times more volatile than US48203RAM60. It trades about -0.39 of its total potential returns per unit of risk. US48203RAM60 is currently generating about -0.17 per unit of volatility. If you would invest  9,583  in US48203RAM60 on October 10, 2024 and sell it today you would lose (98.00) from holding US48203RAM60 or give up 1.02% of portfolio value over 90 days.

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

Ambev SA ADR  vs.  US48203RAM60

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.

US48203RAM60

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US48203RAM60 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 48203RAM6 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 48203RAM6

The main advantage of trading using opposite Ambev SA and 48203RAM6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, 48203RAM6 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 48203RAM6 will offset losses from the drop in 48203RAM6's long position.

The idea behind Ambev SA ADR and US48203RAM60 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.