Correlation Between Ambev SA and Inter Parfums

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

Diversification Opportunities for Ambev SA and Inter Parfums

-0.37

Correlation Coefficient

Ambev SA  Inter Parfums

Very good diversification

The 3 months correlation between Ambev and Inter is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Ambev SA i.e., Ambev SA and Inter Parfums go up and down completely randomly.

Pair Corralation between Ambev SA and Inter Parfums

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Inter Parfums. In addition to that, Ambev SA is 1.22 times more volatile than Inter Parfums. It trades about -0.14 of its total potential returns per unit of risk. Inter Parfums is currently generating about 0.07 per unit of volatility. If you would invest  12,233  in Inter Parfums on September 25, 2024 and sell it today you would earn a total of  793.50  from holding Inter Parfums or generate 6.49% 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.  Inter Parfums

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.

Inter Parfums

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inter Parfums may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ambev SA and Inter Parfums

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

The idea behind Ambev SA ADR and Inter Parfums 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.