Correlation Between Ambev SA and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Ambev SA and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Ambev SA and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and NETGEAR.
Diversification Opportunities for Ambev SA and NETGEAR
Excellent diversification
The 3 months correlation between Ambev and NETGEAR is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Ambev SA i.e., Ambev SA and NETGEAR go up and down completely randomly.
Pair Corralation between Ambev SA and NETGEAR
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the NETGEAR. In addition to that, Ambev SA is 1.16 times more volatile than NETGEAR. It trades about -0.02 of its total potential returns per unit of risk. NETGEAR is currently generating about 0.13 per unit of volatility. If you would invest 2,420 in NETGEAR on September 13, 2024 and sell it today you would earn a total of 133.50 from holding NETGEAR or generate 5.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. NETGEAR
Performance |
| Timeline |
| Ambev SA ADR |
| NETGEAR |
Ambev SA and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and NETGEAR
The main advantage of trading using opposite Ambev SA and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR'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 |
| NETGEAR vs. Passage Bio | NETGEAR vs. Black Diamond Therapeutics | NETGEAR vs. Alector | NETGEAR vs. Century Therapeutics |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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