Correlation Between Grupo Industrial and Ambev SA

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

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

Diversification Opportunities for Grupo Industrial and Ambev SA

-0.23

Correlation Coefficient

Grupo Industrial  Ambev SA

Very good diversification

The 3 months correlation between Grupo and Ambev is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Industrial Saltillo and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Grupo Industrial 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 Grupo Industrial Saltillo 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 Grupo Industrial i.e., Grupo Industrial and Ambev SA go up and down completely randomly.

Pair Corralation between Grupo Industrial and Ambev SA

Assuming the 90 days trading horizon Grupo Industrial is expected to generate 46.07 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Grupo Industrial Saltillo is 1.28 times less risky than Ambev SA. It trades about 0.0 of its potential returns per unit of risk. Ambev SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,819  in Ambev SA on December 23, 2024 and sell it today you would earn a total of  681.00  from holding Ambev SA or generate 17.83% return on investment over 90 days.

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

Grupo Industrial Saltillo  vs.  Ambev SA

Grupo Industrial Saltillo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Industrial Saltillo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Industrial 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Ambev SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Industrial and Ambev SA

The main advantage of trading using opposite Grupo Industrial and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Industrial 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 Grupo Industrial Saltillo 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.