Correlation Between Ambev SA and Grupo KUO

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

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

Diversification Opportunities for Ambev SA and Grupo KUO

-0.34

Correlation Coefficient

Ambev SA  Grupo KUO

Very good diversification

The 3 months correlation between Ambev and Grupo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Grupo KUO SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo KUO SAB 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 Grupo KUO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo KUO SAB has no effect on the direction of Ambev SA i.e., Ambev SA and Grupo KUO go up and down completely randomly.

Pair Corralation between Ambev SA and Grupo KUO

Assuming the 90 days trading horizon Ambev SA is expected to under-perform the Grupo KUO. In addition to that, Ambev SA is 1.37 times more volatile than Grupo KUO SAB. It trades about -0.07 of its total potential returns per unit of risk. Grupo KUO SAB is currently generating about 0.06 per unit of volatility. If you would invest  4,260  in Grupo KUO SAB on September 29, 2024 and sell it today you would earn a total of  340.00  from holding Grupo KUO SAB or generate 7.98% return on investment over 90 days.

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

Ambev SA  vs.  Grupo KUO SAB

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Grupo KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Grupo KUO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ambev SA and Grupo KUO

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

The idea behind Ambev SA and Grupo KUO SAB 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.