Correlation Between Anheuser-Busch InBev and Ambev SA

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

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

Diversification Opportunities for Anheuser-Busch InBev and Ambev SA

0.78

Correlation Coefficient

Anheuser-Busch InBev  Ambev SA

Poor diversification

The 3 months correlation between Anheuser-Busch and Ambev is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV 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 Anheuser-Busch InBev 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 Anheuser Busch InBev SANV 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 Anheuser-Busch InBev i.e., Anheuser-Busch InBev and Ambev SA go up and down completely randomly.

Pair Corralation between Anheuser-Busch InBev and Ambev SA

Assuming the 90 days horizon Anheuser Busch InBev SANV is expected to under-perform the Ambev SA. In addition to that, Anheuser-Busch InBev is 1.08 times more volatile than Ambev SA ADR. It trades about -0.12 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about -0.06 per unit of volatility. If you would invest  227.00  in Ambev SA ADR on September 1, 2024 and sell it today you would lose (15.00) from holding Ambev SA ADR or give up 6.61% of portfolio value over 90 days.

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

Anheuser Busch InBev SANV  vs.  Ambev SA ADR

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very 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 Anheuser-Busch InBev and Ambev SA

The main advantage of trading using opposite Anheuser-Busch InBev and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser-Busch InBev 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 Anheuser Busch InBev SANV 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.