Correlation Between Mastercard and Ambev SA

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

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

Diversification Opportunities for Mastercard and Ambev SA

-0.39

Correlation Coefficient

Mastercard  Ambev SA

Very good diversification

The 3 months correlation between Mastercard and Ambev is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and Ambev SA go up and down completely randomly.

Pair Corralation between Mastercard and Ambev SA

Assuming the 90 days horizon Mastercard is expected to generate 0.57 times more return on investment than Ambev SA. However, Mastercard is 1.75 times less risky than Ambev SA. It trades about 0.08 of its potential returns per unit of risk. Ambev SA is currently generating about 0.0 per unit of risk. If you would invest  33,069  in Mastercard on September 26, 2024 and sell it today you would earn a total of  17,551  from holding Mastercard or generate 53.07% return on investment over 90 days.

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

Mastercard  vs.  Ambev SA

Mastercard

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mastercard reported solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mastercard and Ambev SA

The main advantage of trading using opposite Mastercard and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard 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 Global Correlations module to find global opportunities by holding instruments from different markets.