Correlation Between Ambev SA and Magazine Luiza

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

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

Diversification Opportunities for Ambev SA and Magazine Luiza

-0.15

Correlation Coefficient

Ambev SA  Magazine Luiza

Good diversification

The 3 months correlation between Ambev and Magazine is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Ambev SA i.e., Ambev SA and Magazine Luiza go up and down completely randomly.

Pair Corralation between Ambev SA and Magazine Luiza

Assuming the 90 days trading horizon Ambev SA is expected to generate 0.4 times more return on investment than Magazine Luiza. However, Ambev SA is 2.48 times less risky than Magazine Luiza. It trades about 0.12 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about -0.07 per unit of risk. If you would invest  1,291  in Ambev SA on September 12, 2024 and sell it today you would earn a total of  136.00  from holding Ambev SA or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ambev SA  vs.  Magazine Luiza SA

Ambev SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambev SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Magazine Luiza SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magazine Luiza SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ambev SA and Magazine Luiza

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

The idea behind Ambev SA and Magazine Luiza 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.