Correlation Between Vanguard World and Ambev SA

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

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

Diversification Opportunities for Vanguard World and Ambev SA

-0.15

Correlation Coefficient

Vanguard World  Ambev SA

Good diversification

The 3 months correlation between Vanguard and Ambev is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Vanguard World 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 Vanguard World 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 Vanguard World i.e., Vanguard World and Ambev SA go up and down completely randomly.

Pair Corralation between Vanguard World and Ambev SA

Assuming the 90 days trading horizon Vanguard World is expected to under-perform the Ambev SA. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard World is 1.96 times less risky than Ambev SA. The etf trades about -0.09 of its potential returns per unit of risk. The Ambev SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,521  in Ambev SA on September 18, 2024 and sell it today you would lose (171.00) from holding Ambev SA or give up 3.78% of portfolio value over 90 days.

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

Vanguard World  vs.  Ambev SA

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of very healthy primary indicators, Ambev SA is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard World and Ambev SA

The main advantage of trading using opposite Vanguard World and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard World 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 Vanguard World 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.