Correlation Between Raia Drogasil and Ambev SA

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

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

Diversification Opportunities for Raia Drogasil and Ambev SA

0.04

Correlation Coefficient

Raia Drogasil  Ambev SA

Significant diversification

The 3 months correlation between Raia and Ambev is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Raia Drogasil SA and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Raia Drogasil 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 Raia Drogasil SA 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 Raia Drogasil i.e., Raia Drogasil and Ambev SA go up and down completely randomly.

Pair Corralation between Raia Drogasil and Ambev SA

Assuming the 90 days trading horizon Raia Drogasil SA is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, Raia Drogasil SA is 1.03 times less risky than Ambev SA. The stock trades about -0.12 of its potential returns per unit of risk. The Ambev SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,267  in Ambev SA on September 5, 2024 and sell it today you would earn a total of  118.00  from holding Ambev SA or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Raia Drogasil SA  vs.  Ambev SA

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ambev SA

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambev SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Raia Drogasil and Ambev SA

The main advantage of trading using opposite Raia Drogasil and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raia Drogasil 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 Raia Drogasil SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.