Correlation Between Ecolab and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Ecolab 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 Ecolab and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Ambev SA ADR, you can compare the effects of market volatilities on Ecolab 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 Ecolab with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Ambev SA.
Diversification Opportunities for Ecolab and Ambev SA
Very weak diversification
The 3 months correlation between Ecolab and Ambev is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab 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 Ecolab 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 Ecolab 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 Ecolab i.e., Ecolab and Ambev SA go up and down completely randomly.
Pair Corralation between Ecolab and Ambev SA
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.78 times more return on investment than Ambev SA. However, Ecolab Inc is 1.29 times less risky than Ambev SA. It trades about 0.1 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.06 per unit of risk. If you would invest 19,050 in Ecolab Inc on September 2, 2024 and sell it today you would earn a total of 5,827 from holding Ecolab Inc or generate 30.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Ambev SA ADR
Performance |
| Timeline |
| Ecolab Inc |
| Ambev SA ADR |
Ecolab and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Ambev SA
The main advantage of trading using opposite Ecolab and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab 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.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
| Ambev SA vs. Compania Cervecerias Unidas | Ambev SA vs. Molson Coors Brewing | Ambev SA vs. Suntory Beverage Food | Ambev SA vs. Carlsberg AS |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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