Correlation Between Ambev SA and Direct Line
Can any of the company-specific risk be diversified away by investing in both Ambev SA and Direct Line 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 Ambev SA and Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambev SA ADR and Direct Line Insurance, you can compare the effects of market volatilities on Ambev SA and Direct Line 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 Ambev SA with a short position of Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Direct Line.
Diversification Opportunities for Ambev SA and Direct Line
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ambev and Direct is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and Ambev SA 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 Ambev SA ADR are associated (or correlated) with Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Ambev SA i.e., Ambev SA and Direct Line go up and down completely randomly.
Pair Corralation between Ambev SA and Direct Line
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.78 times less risky than Direct Line. The stock trades about -0.02 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 935.00 in Direct Line Insurance on November 3, 2024 and sell it today you would earn a total of 462.00 from holding Direct Line Insurance or generate 49.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ambev SA ADR vs. Direct Line Insurance
Performance |
| Timeline |
| Ambev SA ADR |
| Direct Line Insurance |
Ambev SA and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and Direct Line
The main advantage of trading using opposite Ambev SA and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Boston Beer | Ambev SA vs. Carlsberg AS | Ambev SA vs. Compania Cervecerias Unidas |
| Direct Line vs. United Parks Resorts | Direct Line vs. Udemy Inc | Direct Line vs. BRP Inc | Direct Line vs. Ihuman Inc |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |