Correlation Between Ambev SA and SEMPRA

Can any of the company-specific risk be diversified away by investing in both Ambev SA and SEMPRA 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 SEMPRA 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 SEMPRA ENERGY 325, you can compare the effects of market volatilities on Ambev SA and SEMPRA 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 SEMPRA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and SEMPRA.

Diversification Opportunities for Ambev SA and SEMPRA

0.62

Correlation Coefficient

Ambev SA  SEMPRA

Poor diversification

The 3 months correlation between Ambev and SEMPRA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and SEMPRA ENERGY 325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEMPRA ENERGY 325 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 SEMPRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEMPRA ENERGY 325 has no effect on the direction of Ambev SA i.e., Ambev SA and SEMPRA go up and down completely randomly.

Pair Corralation between Ambev SA and SEMPRA

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the SEMPRA. In addition to that, Ambev SA is 2.3 times more volatile than SEMPRA ENERGY 325. It trades about -0.06 of its total potential returns per unit of risk. SEMPRA ENERGY 325 is currently generating about -0.1 per unit of volatility. If you would invest  9,633  in SEMPRA ENERGY 325 on September 2, 2024 and sell it today you would lose (330.00) from holding SEMPRA ENERGY 325 or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.94%
Values	Daily Returns

Ambev SA ADR  vs.  SEMPRA ENERGY 325

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 fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SEMPRA ENERGY 325

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEMPRA ENERGY 325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SEMPRA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ambev SA and SEMPRA

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

The idea behind Ambev SA ADR and SEMPRA ENERGY 325 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.