Correlation Between Ambev SA and Oracle

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Can any of the company-specific risk be diversified away by investing in both Ambev SA and Oracle 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 Oracle 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 Oracle Corp 58, you can compare the effects of market volatilities on Ambev SA and Oracle 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 Oracle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Oracle.

Diversification Opportunities for Ambev SA and Oracle

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ambev and Oracle is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Oracle Corp 58 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Corp 58 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Corp 58 has no effect on the direction of Ambev SA i.e., Ambev SA and Oracle go up and down completely randomly.

Pair Corralation between Ambev SA and Oracle

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Oracle. In addition to that, Ambev SA is 7.56 times more volatile than Oracle Corp 58. It trades about -0.02 of its total potential returns per unit of risk. Oracle Corp 58 is currently generating about -0.01 per unit of volatility. If you would invest  10,263  in Oracle Corp 58 on September 3, 2024 and sell it today you would lose (148.00) from holding Oracle Corp 58 or give up 1.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.76%
ValuesDaily Returns

Ambev SA ADR  vs.  Oracle Corp 58

 Performance 
       Timeline  
Ambev SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Oracle Corp 58 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Oracle Corp 58 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Oracle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ambev SA and Oracle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ambev SA and Oracle

The main advantage of trading using opposite Ambev SA and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Oracle 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 Oracle will offset losses from the drop in Oracle's long position.
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The idea behind Ambev SA ADR and Oracle Corp 58 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.
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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