Correlation Between TRAVEL LEISURE and Ambev SA

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

By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Ambev SA, you can compare the effects of market volatilities on TRAVEL LEISURE 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 TRAVEL LEISURE with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and Ambev SA.

Diversification Opportunities for TRAVEL LEISURE and Ambev SA

-0.32

Correlation Coefficient

TRAVEL LEISURE  Ambev SA

Very good diversification

The 3 months correlation between TRAVEL and Ambev is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and TRAVEL LEISURE 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 TRAVEL LEISURE DL 01 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 TRAVEL LEISURE i.e., TRAVEL LEISURE and Ambev SA go up and down completely randomly.

Pair Corralation between TRAVEL LEISURE and Ambev SA

Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to generate 1.01 times more return on investment than Ambev SA. However, TRAVEL LEISURE is 1.01 times more volatile than Ambev SA. It trades about 0.05 of its potential returns per unit of risk. Ambev SA is currently generating about 0.0 per unit of risk. If you would invest  3,105  in TRAVEL LEISURE DL 01 on September 26, 2024 and sell it today you would earn a total of  1,755  from holding TRAVEL LEISURE DL 01 or generate 56.52% return on investment over 90 days.

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

TRAVEL LEISURE DL 01  vs.  Ambev SA

TRAVEL LEISURE DL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAVEL LEISURE and Ambev SA

The main advantage of trading using opposite TRAVEL LEISURE and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL LEISURE 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 TRAVEL LEISURE DL 01 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.