Correlation Between Under Armour and Ambev SA

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

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

Diversification Opportunities for Under Armour and Ambev SA

-0.37

Correlation Coefficient

Under Armour  Ambev SA

Very good diversification

The 3 months correlation between Under and Ambev is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C 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 Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and Ambev SA go up and down completely randomly.

Pair Corralation between Under Armour and Ambev SA

Allowing for the 90-day total investment horizon Under Armour is expected to generate 1.26 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Under Armour C is 1.08 times less risky than Ambev SA. It trades about 0.12 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Ambev SA ADR on September 12, 2024 and sell it today you would earn a total of  12.00  from holding Ambev SA ADR or generate 5.45% return on investment over 90 days.

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

Under Armour C  vs.  Ambev SA ADR

Under Armour C

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Under Armour C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Under Armour sustained solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

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 fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Under Armour and Ambev SA

The main advantage of trading using opposite Under Armour and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour C 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.