Correlation Between Ambev SA and JBS SA

Can any of the company-specific risk be diversified away by investing in both Ambev SA and JBS SA 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 JBS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambev SA and JBS SA, you can compare the effects of market volatilities on Ambev SA and JBS SA 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 JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and JBS SA.

Diversification Opportunities for Ambev SA and JBS SA

0.53

Correlation Coefficient

Ambev SA  JBS SA

Very weak diversification

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

Pair Corralation between Ambev SA and JBS SA

Assuming the 90 days trading horizon Ambev SA is expected to generate 1.08 times less return on investment than JBS SA. But when comparing it to its historical volatility, Ambev SA is 1.92 times less risky than JBS SA. It trades about 0.15 of its potential returns per unit of risk. JBS SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,630  in JBS SA on December 30, 2024 and sell it today you would earn a total of  528.00  from holding JBS SA or generate 14.55% return on investment over 90 days.

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

Ambev SA  vs.  JBS SA

Ambev SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambev SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

JBS SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and JBS SA

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

The idea behind Ambev SA and JBS SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.