Correlation Between ECD Automotive and Ambev SA
Can any of the company-specific risk be diversified away by investing in both ECD Automotive 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 ECD Automotive and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and Ambev SA ADR, you can compare the effects of market volatilities on ECD Automotive 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 ECD Automotive with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and Ambev SA.
Diversification Opportunities for ECD Automotive and Ambev SA
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ECD and Ambev is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design 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 ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and Ambev SA go up and down completely randomly.
Pair Corralation between ECD Automotive and Ambev SA
Given the investment horizon of 90 days ECD Automotive Design is expected to generate 3.17 times more return on investment than Ambev SA. However, ECD Automotive is 3.17 times more volatile than Ambev SA ADR. It trades about -0.02 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.17 per unit of risk. If you would invest 102.00 in ECD Automotive Design on August 29, 2024 and sell it today you would lose (4.00) from holding ECD Automotive Design or give up 3.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ECD Automotive Design vs. Ambev SA ADR
Performance |
| Timeline |
| ECD Automotive Design |
| Ambev SA ADR |
ECD Automotive and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ECD Automotive and Ambev SA
The main advantage of trading using opposite ECD Automotive and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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.| ECD Automotive vs. Bel Fuse A | ECD Automotive vs. QuickLogic | ECD Automotive vs. Treasury Wine Estates | ECD Automotive vs. Arrow Electronics |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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