Correlation Between Catalent and Ambev SA

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

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

Diversification Opportunities for Catalent and Ambev SA

-0.18

Correlation Coefficient

Catalent  Ambev SA

Good diversification

The 3 months correlation between Catalent and Ambev is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and Ambev SA go up and down completely randomly.

Pair Corralation between Catalent and Ambev SA

Given the investment horizon of 90 days Catalent is expected to generate 1.88 times more return on investment than Ambev SA. However, Catalent is 1.88 times more volatile than Ambev SA ADR. It trades about 0.04 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.01 per unit of risk. If you would invest  4,545  in Catalent on September 23, 2024 and sell it today you would earn a total of  1,803  from holding Catalent or generate 39.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Catalent  vs.  Ambev SA ADR

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Catalent and Ambev SA

The main advantage of trading using opposite Catalent and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.