Correlation Between Ambev SA and WK Kellogg
Can any of the company-specific risk be diversified away by investing in both Ambev SA and WK Kellogg 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 WK Kellogg 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 WK Kellogg Co, you can compare the effects of market volatilities on Ambev SA and WK Kellogg 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 WK Kellogg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and WK Kellogg.
Diversification Opportunities for Ambev SA and WK Kellogg
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ambev and KLG is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and WK Kellogg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WK Kellogg 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 WK Kellogg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WK Kellogg has no effect on the direction of Ambev SA i.e., Ambev SA and WK Kellogg go up and down completely randomly.
Pair Corralation between Ambev SA and WK Kellogg
Given the investment horizon of 90 days Ambev SA ADR is expected to generate 0.71 times more return on investment than WK Kellogg. However, Ambev SA ADR is 1.4 times less risky than WK Kellogg. It trades about -0.09 of its potential returns per unit of risk. WK Kellogg Co is currently generating about -0.08 per unit of risk. If you would invest 185.00 in Ambev SA ADR on October 30, 2024 and sell it today you would lose (6.00) from holding Ambev SA ADR or give up 3.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. WK Kellogg Co
Performance |
| Timeline |
| Ambev SA ADR |
| WK Kellogg |
Ambev SA and WK Kellogg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and WK Kellogg
The main advantage of trading using opposite Ambev SA and WK Kellogg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, WK Kellogg 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 WK Kellogg will offset losses from the drop in WK Kellogg'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 |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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