Correlation Between Element Global and Ambev SA

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

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

Diversification Opportunities for Element Global and Ambev SA

0.0

Correlation Coefficient

Element Global  Ambev SA

Pay attention - limited upside

The 3 months correlation between Element and Ambev is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Element Global 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 Element Global 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 Element Global 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 Element Global i.e., Element Global and Ambev SA go up and down completely randomly.

Pair Corralation between Element Global and Ambev SA

Given the investment horizon of 90 days Element Global is expected to under-perform the Ambev SA. In addition to that, Element Global is 3.75 times more volatile than Ambev SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about -0.03 per unit of volatility. If you would invest  241.00  in Ambev SA ADR on December 5, 2024 and sell it today you would lose (32.00) from holding Ambev SA ADR or give up 13.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Element Global  vs.  Ambev SA ADR

Element Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Element Global is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Ambev SA ADR

Risk-Adjusted Performance

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 Element Global and Ambev SA

The main advantage of trading using opposite Element Global and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Global 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 Element Global 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.