Correlation Between HE Equipment and Ambev SA
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Ambev SA ADR, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Ambev SA.
Diversification Opportunities for HE Equipment and Ambev SA
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HEES and Ambev is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services 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 HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Ambev SA go up and down completely randomly.
Pair Corralation between HE Equipment and Ambev SA
Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.69 times more return on investment than Ambev SA. However, HE Equipment is 1.69 times more volatile than Ambev SA ADR. It trades about 0.19 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 4,455 in HE Equipment Services on September 2, 2024 and sell it today you would earn a total of 1,519 from holding HE Equipment Services or generate 34.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Ambev SA ADR
Performance |
| Timeline |
| HE Equipment Services |
| Ambev SA ADR |
HE Equipment and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Ambev SA
The main advantage of trading using opposite HE Equipment and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
| 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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