Correlation Between Ambev SA and Western Digital
Can any of the company-specific risk be diversified away by investing in both Ambev SA and Western Digital 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 Western Digital 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 Western Digital, you can compare the effects of market volatilities on Ambev SA and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Western Digital.
Diversification Opportunities for Ambev SA and Western Digital
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ambev and Western is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Ambev SA i.e., Ambev SA and Western Digital go up and down completely randomly.
Pair Corralation between Ambev SA and Western Digital
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Western Digital. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 1.75 times less risky than Western Digital. The stock trades about -0.15 of its potential returns per unit of risk. The Western Digital is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6,971 in Western Digital on August 27, 2024 and sell it today you would lose (28.00) from holding Western Digital or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ambev SA ADR vs. Western Digital
Performance |
| Timeline |
| Ambev SA ADR |
| Western Digital |
Ambev SA and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ambev SA and Western Digital
The main advantage of trading using opposite Ambev SA and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital'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 |
| Western Digital vs. D Wave Quantum | Western Digital vs. Rigetti Computing | Western Digital vs. Cricut Inc | Western Digital vs. Quantum Computing |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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