Correlation Between El Pollo and Ambev SA
Can any of the company-specific risk be diversified away by investing in both El Pollo 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 El Pollo and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Ambev SA ADR, you can compare the effects of market volatilities on El Pollo 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 El Pollo with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Ambev SA.
Diversification Opportunities for El Pollo and Ambev SA
Poor diversification
The 3 months correlation between LOCO and Ambev is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco 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 El Pollo 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 El Pollo Loco 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 El Pollo i.e., El Pollo and Ambev SA go up and down completely randomly.
Pair Corralation between El Pollo and Ambev SA
Given the investment horizon of 90 days El Pollo Loco is expected to generate 1.02 times more return on investment than Ambev SA. However, El Pollo is 1.02 times more volatile than Ambev SA ADR. It trades about 0.01 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 1,196 in El Pollo Loco on November 1, 2024 and sell it today you would lose (4.00) from holding El Pollo Loco or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Pollo Loco vs. Ambev SA ADR
Performance |
| Timeline |
| El Pollo Loco |
| Ambev SA ADR |
El Pollo and Ambev SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Pollo and Ambev SA
The main advantage of trading using opposite El Pollo and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo 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.| El Pollo vs. FAT Brands | El Pollo vs. Potbelly Co | El Pollo vs. BJs Restaurants | El Pollo vs. One Group Hospitality |
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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