Correlation Between Global Net and Ambev SA

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

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

Diversification Opportunities for Global Net and Ambev SA

0.29

Correlation Coefficient

Global Net  Ambev SA

Modest diversification

The 3 months correlation between Global and Ambev is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease 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 Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and Ambev SA go up and down completely randomly.

Pair Corralation between Global Net and Ambev SA

Assuming the 90 days trading horizon Global Net Lease is expected to generate 0.86 times more return on investment than Ambev SA. However, Global Net Lease is 1.17 times less risky than Ambev SA. It trades about 0.09 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.15 per unit of risk. If you would invest  2,255  in Global Net Lease on October 25, 2024 and sell it today you would earn a total of  55.00  from holding Global Net Lease or generate 2.44% return on investment over 90 days.

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

Global Net Lease  vs.  Ambev SA ADR

Global Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Global Net and Ambev SA

The main advantage of trading using opposite Global Net and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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 Global Net Lease 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.