Correlation Between Ambev SA and Netflix

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

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

Diversification Opportunities for Ambev SA and Netflix

-0.47

Correlation Coefficient

Ambev SA  Netflix

Very good diversification

The 3 months correlation between Ambev and Netflix is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Netflix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netflix 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 Netflix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netflix has no effect on the direction of Ambev SA i.e., Ambev SA and Netflix go up and down completely randomly.

Pair Corralation between Ambev SA and Netflix

Assuming the 90 days trading horizon Ambev SA is expected to under-perform the Netflix. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA is 1.12 times less risky than Netflix. The stock trades about -0.02 of its potential returns per unit of risk. The Netflix is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,332,000  in Netflix on September 18, 2024 and sell it today you would earn a total of  527,900  from holding Netflix or generate 39.63% return on investment over 90 days.

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

Ambev SA  vs.  Netflix

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Ambev SA is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Netflix

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netflix are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Netflix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Netflix

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

The idea behind Ambev SA and Netflix 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.