Correlation Between Basic Materials and Ambev SA
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Ambev SA, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Ambev SA.
Diversification Opportunities for Basic Materials and Ambev SA
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Ambev is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Basic Materials 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 Basic Materials 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 has no effect on the direction of Basic Materials i.e., Basic Materials and Ambev SA go up and down completely randomly.
Pair Corralation between Basic Materials and Ambev SA
Assuming the 90 days trading horizon Basic Materials is expected to generate 1.01 times more return on investment than Ambev SA. However, Basic Materials is 1.01 times more volatile than Ambev SA. It trades about 0.06 of its potential returns per unit of risk. Ambev SA is currently generating about 0.06 per unit of risk. If you would invest 536,532 in Basic Materials on August 30, 2024 and sell it today you would earn a total of 40,588 from holding Basic Materials or generate 7.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Basic Materials vs. Ambev SA
Performance |
| Timeline |
Basic Materials and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Ambev SA
Pair trading matchups for Ambev SA
Pair Trading with Basic Materials and Ambev SA
The main advantage of trading using opposite Basic Materials and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. United Rentals | Basic Materials vs. Livetech da Bahia | Basic Materials vs. Telecomunicaes Brasileiras SA | Basic Materials vs. Charter Communications |
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 Stocks Directory module to find actively traded stocks across global markets.
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