Correlation Between WT Offshore and Ambev SA

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

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

Diversification Opportunities for WT Offshore and Ambev SA

-0.37

Correlation Coefficient

WT Offshore  Ambev SA

Very good diversification

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

Pair Corralation between WT Offshore and Ambev SA

Considering the 90-day investment horizon WT Offshore is expected to generate 4.93 times less return on investment than Ambev SA. In addition to that, WT Offshore is 1.82 times more volatile than Ambev SA ADR. It trades about 0.01 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about 0.13 per unit of volatility. If you would invest  200.00  in Ambev SA ADR on December 17, 2024 and sell it today you would earn a total of  30.00  from holding Ambev SA ADR or generate 15.0% return on investment over 90 days.

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

WT Offshore  vs.  Ambev SA ADR

WT Offshore

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WT Offshore are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, WT Offshore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Ambev SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WT Offshore and Ambev SA

The main advantage of trading using opposite WT Offshore and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Offshore 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 WT Offshore 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.