Correlation Between HE Equipment and Ambev SA

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Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Ambev SA ADR, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Ambev SA.

Diversification Opportunities for HE Equipment and Ambev SA

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between HEES and Ambev is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Ambev SA go up and down completely randomly.

Pair Corralation between HE Equipment and Ambev SA

Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.37 times more return on investment than Ambev SA. However, HE Equipment is 1.37 times more volatile than Ambev SA ADR. It trades about 0.06 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.09 per unit of risk. If you would invest  4,455  in HE Equipment Services on October 3, 2024 and sell it today you would earn a total of  441.00  from holding HE Equipment Services or generate 9.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

HE Equipment Services  vs.  Ambev SA ADR

 Performance 
       Timeline  
HE Equipment Services 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HE Equipment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Ambev SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

HE Equipment and Ambev SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HE Equipment and Ambev SA

The main advantage of trading using opposite HE Equipment and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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