Correlation Between Ambev SA and Raia Drogasil

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

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

Diversification Opportunities for Ambev SA and Raia Drogasil

0.18

Correlation Coefficient

Ambev SA  Raia Drogasil

Average diversification

The 3 months correlation between Ambev and Raia is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil 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 Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of Ambev SA i.e., Ambev SA and Raia Drogasil go up and down completely randomly.

Pair Corralation between Ambev SA and Raia Drogasil

Assuming the 90 days trading horizon Ambev SA is expected to generate 0.81 times more return on investment than Raia Drogasil. However, Ambev SA is 1.23 times less risky than Raia Drogasil. It trades about 0.03 of its potential returns per unit of risk. Raia Drogasil SA is currently generating about -0.12 per unit of risk. If you would invest  1,299  in Ambev SA on September 4, 2024 and sell it today you would earn a total of  26.00  from holding Ambev SA or generate 2.0% return on investment over 90 days.

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

Ambev SA  vs.  Raia Drogasil SA

Ambev SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ambev SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ambev SA and Raia Drogasil

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

The idea behind Ambev SA and Raia Drogasil 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..