Correlation Between BRC and Ambev SA
Can any of the company-specific risk be diversified away by investing in both BRC and Ambev 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 BRC and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRC Inc and Ambev SA ADR, you can compare the effects of market volatilities on BRC and Ambev 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 BRC with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and Ambev SA.
Diversification Opportunities for BRC and Ambev SA
Weak diversification
The 3 months correlation between BRC and Ambev is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BRC Inc and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and BRC 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 BRC Inc are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of BRC i.e., BRC and Ambev SA go up and down completely randomly.
Pair Corralation between BRC and Ambev SA
Given the investment horizon of 90 days BRC Inc is expected to under-perform the Ambev SA. In addition to that, BRC is 1.24 times more volatile than Ambev SA ADR. It trades about -0.33 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about 0.04 per unit of volatility. If you would invest 183.00 in Ambev SA ADR on November 3, 2024 and sell it today you would earn a total of 2.00 from holding Ambev SA ADR or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRC Inc vs. Ambev SA ADR
Performance |
| Timeline |
| BRC Inc |
| Ambev SA ADR |
BRC and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRC and Ambev SA
The main advantage of trading using opposite BRC and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC position performs unexpectedly, Ambev 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 Ambev SA will offset losses from the drop in Ambev SA's long position.The idea behind BRC Inc and Ambev SA ADR 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.| Ambev SA vs. Fomento Economico Mexicano | Ambev SA vs. Boston Beer | Ambev SA vs. Carlsberg AS | Ambev SA vs. Compania Cervecerias Unidas |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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