Correlation Between Ambev SA and SGS SA
Can any of the company-specific risk be diversified away by investing in both Ambev SA and SGS 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 Ambev SA and SGS SA 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 SGS SA, you can compare the effects of market volatilities on Ambev SA and SGS 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 Ambev SA with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and SGS SA.
Diversification Opportunities for Ambev SA and SGS SA
Poor diversification
The 3 months correlation between Ambev and SGS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Ambev SA i.e., Ambev SA and SGS SA go up and down completely randomly.
Pair Corralation between Ambev SA and SGS SA
Given the investment horizon of 90 days Ambev SA ADR is expected to generate 1.14 times more return on investment than SGS SA. However, Ambev SA is 1.14 times more volatile than SGS SA. It trades about -0.15 of its potential returns per unit of risk. SGS SA is currently generating about -0.24 per unit of risk. If you would invest 228.00 in Ambev SA ADR on August 27, 2024 and sell it today you would lose (11.00) from holding Ambev SA ADR or give up 4.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. SGS SA
Performance |
| Timeline |
| Ambev SA ADR |
| SGS SA |
Ambev SA and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and SGS SA
The main advantage of trading using opposite Ambev SA and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, SGS 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 SGS SA will offset losses from the drop in SGS SA'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 |
| SGS SA vs. Sack Lunch Productions | SGS SA vs. Potash America | SGS SA vs. Dalrada Financial Corp | SGS SA vs. TransUnion |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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