Correlation Between IShares Trust and Ambev SA

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

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

Diversification Opportunities for IShares Trust and Ambev SA

-0.29

Correlation Coefficient

IShares Trust  Ambev SA

Very good diversification

The 3 months correlation between IShares and Ambev is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and IShares Trust 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 iShares Trust 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 IShares Trust i.e., IShares Trust and Ambev SA go up and down completely randomly.

Pair Corralation between IShares Trust and Ambev SA

Assuming the 90 days trading horizon iShares Trust is expected to generate 0.48 times more return on investment than Ambev SA. However, iShares Trust is 2.07 times less risky than Ambev SA. It trades about 0.01 of its potential returns per unit of risk. Ambev SA is currently generating about -0.05 per unit of risk. If you would invest  183,803  in iShares Trust on September 18, 2024 and sell it today you would earn a total of  297.00  from holding iShares Trust or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

iShares Trust   vs.  Ambev SA

iShares Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of very healthy primary indicators, Ambev SA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Ambev SA

The main advantage of trading using opposite IShares Trust and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 iShares Trust 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.