Correlation Between RCI Hospitality and Ambev SA

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

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

Diversification Opportunities for RCI Hospitality and Ambev SA

-0.7

Correlation Coefficient

RCI Hospitality  Ambev SA

Excellent diversification

The 3 months correlation between RCI and Ambev is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding RCI Hospitality Holdings 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 RCI Hospitality 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 RCI Hospitality Holdings 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 RCI Hospitality i.e., RCI Hospitality and Ambev SA go up and down completely randomly.

Pair Corralation between RCI Hospitality and Ambev SA

Given the investment horizon of 90 days RCI Hospitality Holdings is expected to under-perform the Ambev SA. In addition to that, RCI Hospitality is 1.41 times more volatile than Ambev SA ADR. It trades about -0.03 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about -0.01 per unit of volatility. If you would invest  246.00  in Ambev SA ADR on September 23, 2024 and sell it today you would lose (40.00) from holding Ambev SA ADR or give up 16.26% of portfolio value over 90 days.

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

RCI Hospitality Holdings  vs.  Ambev SA ADR

RCI Hospitality Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with RCI Hospitality and Ambev SA

The main advantage of trading using opposite RCI Hospitality and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCI Hospitality 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 RCI Hospitality Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.