Correlation Between Ambev SA and SGS SA

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

Diversification Opportunities for Ambev SA and SGS SA

0.65

Correlation Coefficient

Ambev SA  SGS SA

Poor diversification

The 3 months correlation between Ambev and SGS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Ambev SA i.e., Ambev SA and SGS SA go up and down completely randomly.

Pair Corralation between Ambev SA and SGS SA

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the SGS SA. In addition to that, Ambev SA is 1.16 times more volatile than SGS SA. It trades about -0.03 of its total potential returns per unit of risk. SGS SA is currently generating about 0.03 per unit of volatility. If you would invest  885.00  in SGS SA on September 26, 2024 and sell it today you would earn a total of  123.00  from holding SGS SA or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Ambev SA ADR  vs.  SGS SA

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.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA 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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ambev SA and SGS SA

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

The idea behind Ambev SA ADR and SGS SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.