Correlation Between Ambev SA and COPT Defense

Can any of the company-specific risk be diversified away by investing in both Ambev SA and COPT Defense 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 Ambev SA and COPT Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambev SA ADR and COPT Defense Properties, you can compare the effects of market volatilities on Ambev SA and COPT Defense 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 Ambev SA with a short position of COPT Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and COPT Defense.

Diversification Opportunities for Ambev SA and COPT Defense

-0.38

Correlation Coefficient

Ambev SA  COPT Defense

Very good diversification

The 3 months correlation between Ambev and COPT is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and COPT Defense Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COPT Defense Properties and Ambev SA 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 Ambev SA ADR are associated (or correlated) with COPT Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COPT Defense Properties has no effect on the direction of Ambev SA i.e., Ambev SA and COPT Defense go up and down completely randomly.

Pair Corralation between Ambev SA and COPT Defense

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the COPT Defense. In addition to that, Ambev SA is 1.9 times more volatile than COPT Defense Properties. It trades about -0.13 of its total potential returns per unit of risk. COPT Defense Properties is currently generating about 0.07 per unit of volatility. If you would invest  3,041  in COPT Defense Properties on September 20, 2024 and sell it today you would earn a total of  52.00  from holding COPT Defense Properties or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ambev SA ADR  vs.  COPT Defense Properties

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

COPT Defense Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, COPT Defense is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ambev SA and COPT Defense

The main advantage of trading using opposite Ambev SA and COPT Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, COPT Defense 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 COPT Defense will offset losses from the drop in COPT Defense's long position.

The idea behind Ambev SA ADR and COPT Defense Properties pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.