Correlation Between Ambev SA and Capital One

Can any of the company-specific risk be diversified away by investing in both Ambev SA and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambev SA and Capital One Financial, you can compare the effects of market volatilities on Ambev SA and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Capital One.

Diversification Opportunities for Ambev SA and Capital One

-0.41

Correlation Coefficient

Ambev SA  Capital One

Very good diversification

The 3 months correlation between Ambev and Capital is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Ambev SA i.e., Ambev SA and Capital One go up and down completely randomly.

Pair Corralation between Ambev SA and Capital One

Assuming the 90 days trading horizon Ambev SA is expected to under-perform the Capital One. In addition to that, Ambev SA is 2.45 times more volatile than Capital One Financial. It trades about -0.15 of its total potential returns per unit of risk. Capital One Financial is currently generating about -0.03 per unit of volatility. If you would invest  382,986  in Capital One Financial on September 26, 2024 and sell it today you would lose (3,534) from holding Capital One Financial or give up 0.92% of portfolio value over 90 days.

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

Ambev SA  vs.  Capital One Financial

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Capital One Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capital One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Capital One

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

The idea behind Ambev SA and Capital One Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.