Correlation Between Zimmer Biomet and Ambev SA

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

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

Diversification Opportunities for Zimmer Biomet and Ambev SA

-0.39

Correlation Coefficient

Zimmer Biomet  Ambev SA

Very good diversification

The 3 months correlation between Zimmer and Ambev is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Zimmer Biomet Holdings and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Zimmer Biomet 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 Zimmer Biomet 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 has no effect on the direction of Zimmer Biomet i.e., Zimmer Biomet and Ambev SA go up and down completely randomly.

Pair Corralation between Zimmer Biomet and Ambev SA

Assuming the 90 days horizon Zimmer Biomet Holdings is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, Zimmer Biomet Holdings is 1.43 times less risky than Ambev SA. The stock trades about -0.01 of its potential returns per unit of risk. The Ambev SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Ambev SA on September 26, 2024 and sell it today you would lose (19.00) from holding Ambev SA or give up 8.84% of portfolio value over 90 days.

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

Zimmer Biomet Holdings  vs.  Ambev SA

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Zimmer Biomet and Ambev SA

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

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.