Correlation Between Carlsberg and Ambev SA

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

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

Diversification Opportunities for Carlsberg and Ambev SA

0.5

Correlation Coefficient

Carlsberg  Ambev SA

Very weak diversification

The 3 months correlation between Carlsberg and Ambev is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Carlsberg 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 Carlsberg AS 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 has no effect on the direction of Carlsberg i.e., Carlsberg and Ambev SA go up and down completely randomly.

Pair Corralation between Carlsberg and Ambev SA

Assuming the 90 days trading horizon Carlsberg AS is expected to generate 1.0 times more return on investment than Ambev SA. However, Carlsberg AS is 1.0 times less risky than Ambev SA. It trades about 0.02 of its potential returns per unit of risk. Ambev SA is currently generating about 0.0 per unit of risk. If you would invest  8,010  in Carlsberg AS on September 26, 2024 and sell it today you would earn a total of  1,156  from holding Carlsberg AS or generate 14.43% return on investment over 90 days.

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

Carlsberg AS  vs.  Ambev SA

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Carlsberg and Ambev SA

The main advantage of trading using opposite Carlsberg and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlsberg 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 Carlsberg AS and Ambev SA 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.