Correlation Between Ambev SA and Valneva SE

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

Diversification Opportunities for Ambev SA and Valneva SE

0.53

Correlation Coefficient

Ambev SA  Valneva SE

Very weak diversification

The 3 months correlation between Ambev and Valneva is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Valneva SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valneva SE ADR 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 Valneva SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valneva SE ADR has no effect on the direction of Ambev SA i.e., Ambev SA and Valneva SE go up and down completely randomly.

Pair Corralation between Ambev SA and Valneva SE

Given the investment horizon of 90 days Ambev SA is expected to generate 2.61 times less return on investment than Valneva SE. But when comparing it to its historical volatility, Ambev SA ADR is 2.83 times less risky than Valneva SE. It trades about 0.2 of its potential returns per unit of risk. Valneva SE ADR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  432.00  in Valneva SE ADR on December 28, 2024 and sell it today you would earn a total of  294.00  from holding Valneva SE ADR or generate 68.06% return on investment over 90 days.

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

Ambev SA ADR  vs.  Valneva SE ADR

Ambev SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Valneva SE ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valneva SE ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Valneva SE displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Valneva SE

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

The idea behind Ambev SA ADR and Valneva SE ADR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.