Correlation Between GECCH and Ambev SA

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

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

Diversification Opportunities for GECCH and Ambev SA

-0.31

Correlation Coefficient

GECCH  Ambev SA

Very good diversification

The 3 months correlation between GECCH and Ambev is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding GECCH 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 GECCH 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 GECCH 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 GECCH i.e., GECCH and Ambev SA go up and down completely randomly.

Pair Corralation between GECCH and Ambev SA

Assuming the 90 days horizon GECCH is expected to generate 0.19 times more return on investment than Ambev SA. However, GECCH is 5.4 times less risky than Ambev SA. It trades about 0.11 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.06 per unit of risk. If you would invest  2,433  in GECCH on September 16, 2024 and sell it today you would earn a total of  52.00  from holding GECCH or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.69%
Values	Daily Returns

GECCH  vs.  Ambev SA ADR

GECCH

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GECCH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, GECCH is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 GECCH and Ambev SA

The main advantage of trading using opposite GECCH and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GECCH 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 GECCH 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.