Correlation Between Corpay and Ambev SA

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

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

Diversification Opportunities for Corpay and Ambev SA

-0.46

Correlation Coefficient

Corpay  Ambev SA

Very good diversification

The 3 months correlation between Corpay and Ambev is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Corpay 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 Corpay 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 Corpay 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 Corpay i.e., Corpay and Ambev SA go up and down completely randomly.

Pair Corralation between Corpay and Ambev SA

Given the investment horizon of 90 days Corpay is expected to generate 6.51 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Corpay Inc is 1.06 times less risky than Ambev SA. It trades about 0.03 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Ambev SA ADR on December 19, 2024 and sell it today you would earn a total of  43.00  from holding Ambev SA ADR or generate 22.4% return on investment over 90 days.

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

Corpay Inc  vs.  Ambev SA ADR

Corpay Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Corpay Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Corpay is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ambev SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Corpay and Ambev SA

The main advantage of trading using opposite Corpay and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corpay 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 Corpay 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.