Correlation Between Ambev SA and Suntory Beverage

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

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

Diversification Opportunities for Ambev SA and Suntory Beverage

0.58

Correlation Coefficient

Ambev SA  Suntory Beverage

Very weak diversification

The 3 months correlation between Ambev and Suntory is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Ambev SA i.e., Ambev SA and Suntory Beverage go up and down completely randomly.

Pair Corralation between Ambev SA and Suntory Beverage

Assuming the 90 days trading horizon Ambev SA is expected to generate 1.18 times more return on investment than Suntory Beverage. However, Ambev SA is 1.18 times more volatile than Suntory Beverage Food. It trades about 0.03 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.03 per unit of risk. If you would invest  184.00  in Ambev SA on September 25, 2024 and sell it today you would earn a total of  12.00  from holding Ambev SA or generate 6.52% return on investment over 90 days.

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

Ambev SA  vs.  Suntory Beverage Food

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. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ambev SA and Suntory Beverage

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

The idea behind Ambev SA and Suntory Beverage Food 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.