Correlation Between BCE and Ambev SA

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

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

Diversification Opportunities for BCE and Ambev SA

0.69

Correlation Coefficient

BCE  Ambev SA

Poor diversification

The 3 months correlation between BCE and Ambev is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc 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 BCE 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 BCE Inc 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 BCE i.e., BCE and Ambev SA go up and down completely randomly.

Pair Corralation between BCE and Ambev SA

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.77 times less risky than Ambev SA. The stock trades about -0.29 of its potential returns per unit of risk. The Ambev SA ADR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Ambev SA ADR on September 12, 2024 and sell it today you would earn a total of  12.00  from holding Ambev SA ADR or generate 5.45% return on investment over 90 days.

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

BCE Inc  vs.  Ambev SA ADR

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with BCE and Ambev SA

The main advantage of trading using opposite BCE and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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 BCE Inc 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..