Correlation Between Xiaomi and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Xiaomi 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 Xiaomi and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xiaomi and Ambev SA, you can compare the effects of market volatilities on Xiaomi 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 Xiaomi with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiaomi and Ambev SA.
Diversification Opportunities for Xiaomi and Ambev SA
Pay attention - limited upside
The 3 months correlation between Xiaomi and Ambev is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Xiaomi and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Xiaomi 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 Xiaomi 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 Xiaomi i.e., Xiaomi and Ambev SA go up and down completely randomly.
Pair Corralation between Xiaomi and Ambev SA
Assuming the 90 days trading horizon Xiaomi is expected to generate 1.28 times more return on investment than Ambev SA. However, Xiaomi is 1.28 times more volatile than Ambev SA. It trades about 0.18 of its potential returns per unit of risk. Ambev SA is currently generating about -0.02 per unit of risk. If you would invest 5,600 in Xiaomi on November 2, 2024 and sell it today you would earn a total of 5,251 from holding Xiaomi or generate 93.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Xiaomi vs. Ambev SA
Performance |
| Timeline |
| Xiaomi |
| Ambev SA |
Xiaomi and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xiaomi and Ambev SA
The main advantage of trading using opposite Xiaomi and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xiaomi 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 Xiaomi 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.| Ambev SA vs. Micron Technology | Ambev SA vs. GMxico Transportes SAB | Ambev SA vs. Grupo Carso SAB | Ambev SA vs. Delta Air Lines |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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