Correlation Between Ambev SA and VinFast Auto

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

Diversification Opportunities for Ambev SA and VinFast Auto

-0.1

Correlation Coefficient

Ambev SA  VinFast Auto

Good diversification

The 3 months correlation between Ambev and VinFast is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and VinFast Auto Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VinFast Auto 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 VinFast Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VinFast Auto has no effect on the direction of Ambev SA i.e., Ambev SA and VinFast Auto go up and down completely randomly.

Pair Corralation between Ambev SA and VinFast Auto

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the VinFast Auto. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 4.2 times less risky than VinFast Auto. The stock trades about -0.16 of its potential returns per unit of risk. The VinFast Auto Ltd is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  41.00  in VinFast Auto Ltd on September 28, 2024 and sell it today you would lose (2.00) from holding VinFast Auto Ltd or give up 4.88% of portfolio value over 90 days.

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

Ambev SA ADR  vs.  VinFast Auto Ltd

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.

VinFast Auto

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VinFast Auto Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, VinFast Auto showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and VinFast Auto

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

The idea behind Ambev SA ADR and VinFast Auto Ltd 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.