Correlation Between Ambev SA and Vista Oil

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

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

Diversification Opportunities for Ambev SA and Vista Oil

-0.38

Correlation Coefficient

Ambev SA  Vista Oil

Very good diversification

The 3 months correlation between Ambev and Vista is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas 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 Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of Ambev SA i.e., Ambev SA and Vista Oil go up and down completely randomly.

Pair Corralation between Ambev SA and Vista Oil

Assuming the 90 days trading horizon Ambev SA is expected to under-perform the Vista Oil. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA is 1.8 times less risky than Vista Oil. The stock trades about -0.06 of its potential returns per unit of risk. The Vista Oil Gas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  90,800  in Vista Oil Gas on September 17, 2024 and sell it today you would earn a total of  26,168  from holding Vista Oil Gas or generate 28.82% return on investment over 90 days.

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

Ambev SA  vs.  Vista Oil Gas

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Vista Oil Gas

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Vista Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Vista Oil

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

The idea behind Ambev SA and Vista Oil Gas 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.