Correlation Between Network CN and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Network CN 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 Network CN and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Network CN and Ambev SA ADR, you can compare the effects of market volatilities on Network CN 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 Network CN with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network CN and Ambev SA.
Diversification Opportunities for Network CN and Ambev SA
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Network and Ambev is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Network CN 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 Network CN 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 Network CN 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 Network CN i.e., Network CN and Ambev SA go up and down completely randomly.
Pair Corralation between Network CN and Ambev SA
Given the investment horizon of 90 days Network CN is expected to generate 29.88 times more return on investment than Ambev SA. However, Network CN is 29.88 times more volatile than Ambev SA ADR. It trades about 0.16 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.22 per unit of risk. If you would invest 4.21 in Network CN on December 28, 2024 and sell it today you would earn a total of 5.79 from holding Network CN or generate 137.53% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 96.77% |
Values | Daily Returns |
Network CN vs. Ambev SA ADR
Performance |
Timeline |
Network CN |
Ambev SA ADR |
Network CN and Ambev SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Network CN and Ambev SA
The main advantage of trading using opposite Network CN and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network CN 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.Network CN vs. Sonos Inc | Network CN vs. National Health Investors | Network CN vs. Life Time Group | Network CN vs. MarketAxess Holdings |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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