Correlation Between Fras Le and Ambipar Participaes

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

By analyzing existing cross correlation between Fras le SA and Ambipar Participaes e, you can compare the effects of market volatilities on Fras Le and Ambipar Participaes 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 Fras Le with a short position of Ambipar Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Ambipar Participaes.

Diversification Opportunities for Fras Le and Ambipar Participaes

0.11

Correlation Coefficient

Fras Le  Ambipar Participaes

Average diversification

The 3 months correlation between Fras and Ambipar is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Ambipar Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambipar Participaes and Fras Le 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 Fras le SA are associated (or correlated) with Ambipar Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambipar Participaes has no effect on the direction of Fras Le i.e., Fras Le and Ambipar Participaes go up and down completely randomly.

Pair Corralation between Fras Le and Ambipar Participaes

Assuming the 90 days trading horizon Fras Le is expected to generate 15.19 times less return on investment than Ambipar Participaes. But when comparing it to its historical volatility, Fras le SA is 5.44 times less risky than Ambipar Participaes. It trades about 0.09 of its potential returns per unit of risk. Ambipar Participaes e is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6,700  in Ambipar Participaes e on September 12, 2024 and sell it today you would earn a total of  12,850  from holding Ambipar Participaes e or generate 191.79% return on investment over 90 days.

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

Fras le SA  vs.  Ambipar Participaes e

Fras le SA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fras Le may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ambipar Participaes

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambipar Participaes e are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ambipar Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fras Le and Ambipar Participaes

The main advantage of trading using opposite Fras Le and Ambipar Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Ambipar Participaes 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 Ambipar Participaes will offset losses from the drop in Ambipar Participaes' long position.

The idea behind Fras le SA and Ambipar Participaes e 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.