Correlation Between Ambev SA and First Republic

Can any of the company-specific risk be diversified away by investing in both Ambev SA and First Republic 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 First Republic 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 First Republic Bank, you can compare the effects of market volatilities on Ambev SA and First Republic 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 First Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and First Republic.

Diversification Opportunities for Ambev SA and First Republic

0.53

Correlation Coefficient

Ambev SA  First Republic

Very weak diversification

The 3 months correlation between Ambev and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Ambev SA i.e., Ambev SA and First Republic go up and down completely randomly.

Pair Corralation between Ambev SA and First Republic

Given the investment horizon of 90 days Ambev SA ADR is expected to generate 0.02 times more return on investment than First Republic. However, Ambev SA ADR is 51.6 times less risky than First Republic. It trades about -0.06 of its potential returns per unit of risk. First Republic Bank is currently generating about -0.06 per unit of risk. If you would invest  274.00  in Ambev SA ADR on September 30, 2024 and sell it today you would lose (87.00) from holding Ambev SA ADR or give up 31.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.22%
Values	Daily Returns

Ambev SA ADR  vs.  First Republic Bank

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, First Republic is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ambev SA and First Republic

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

The idea behind Ambev SA ADR and First Republic Bank 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.