Correlation Between Ambev SA and FibraHotel

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

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

Diversification Opportunities for Ambev SA and FibraHotel

-0.57

Correlation Coefficient

Ambev SA  FibraHotel

Excellent diversification

The 3 months correlation between Ambev and FibraHotel is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel 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 FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Ambev SA i.e., Ambev SA and FibraHotel go up and down completely randomly.

Pair Corralation between Ambev SA and FibraHotel

Assuming the 90 days trading horizon Ambev SA is expected to under-perform the FibraHotel. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA is 1.24 times less risky than FibraHotel. The stock trades about -0.15 of its potential returns per unit of risk. The FibraHotel is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  873.00  in FibraHotel on September 26, 2024 and sell it today you would earn a total of  127.00  from holding FibraHotel or generate 14.55% return on investment over 90 days.

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

Ambev SA  vs.  FibraHotel

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.

FibraHotel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and FibraHotel

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

The idea behind Ambev SA and FibraHotel 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .