Correlation Between Aldel Financial and Ambev SA

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

By analyzing existing cross correlation between Aldel Financial II and Ambev SA ADR, you can compare the effects of market volatilities on Aldel Financial and Ambev 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 Aldel Financial with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Ambev SA.

Diversification Opportunities for Aldel Financial and Ambev SA

0.71

Correlation Coefficient

Aldel Financial  Ambev SA

Poor diversification

The 3 months correlation between Aldel and Ambev is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Aldel Financial i.e., Aldel Financial and Ambev SA go up and down completely randomly.

Pair Corralation between Aldel Financial and Ambev SA

Given the investment horizon of 90 days Aldel Financial is expected to generate 15.13 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Aldel Financial II is 17.34 times less risky than Ambev SA. It trades about 0.22 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Ambev SA ADR on December 19, 2024 and sell it today you would earn a total of  43.00  from holding Ambev SA ADR or generate 22.4% return on investment over 90 days.

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

Aldel Financial II  vs.  Ambev SA ADR

Aldel Financial II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Ambev SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aldel Financial and Ambev SA

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

The idea behind Aldel Financial II and Ambev SA ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.