Correlation Between Brown Forman and AMBRA SA

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

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

Diversification Opportunities for Brown Forman and AMBRA SA

-0.41

Correlation Coefficient

Brown Forman  AMBRA SA

Very good diversification

The 3 months correlation between Brown and AMBRA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Brown Forman and AMBRA SA A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMBRA SA A and Brown Forman 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 Brown Forman are associated (or correlated) with AMBRA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMBRA SA A has no effect on the direction of Brown Forman i.e., Brown Forman and AMBRA SA go up and down completely randomly.

Pair Corralation between Brown Forman and AMBRA SA

Assuming the 90 days trading horizon Brown Forman is expected to generate 2.97 times more return on investment than AMBRA SA. However, Brown Forman is 2.97 times more volatile than AMBRA SA A. It trades about 0.06 of its potential returns per unit of risk. AMBRA SA A is currently generating about 0.02 per unit of risk. If you would invest  3,760  in Brown Forman on September 22, 2024 and sell it today you would earn a total of  120.00  from holding Brown Forman or generate 3.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Brown Forman  vs.  AMBRA SA A

Brown Forman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brown Forman is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AMBRA SA A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AMBRA SA A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AMBRA SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brown Forman and AMBRA SA

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

The idea behind Brown Forman and AMBRA SA A 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.