Correlation Between Alfa SAB and Ambev SA

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

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

Diversification Opportunities for Alfa SAB and Ambev SA

0.12

Correlation Coefficient

Alfa SAB  Ambev SA

Average diversification

The 3 months correlation between Alfa and Ambev is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Alfa SAB 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 Alfa SAB de are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Alfa SAB i.e., Alfa SAB and Ambev SA go up and down completely randomly.

Pair Corralation between Alfa SAB and Ambev SA

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 0.66 times more return on investment than Ambev SA. However, Alfa SAB de is 1.51 times less risky than Ambev SA. It trades about -0.01 of its potential returns per unit of risk. Ambev SA is currently generating about -0.07 per unit of risk. If you would invest  1,547  in Alfa SAB de on September 30, 2024 and sell it today you would lose (51.00) from holding Alfa SAB de or give up 3.3% of portfolio value over 90 days.

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

Alfa SAB de  vs.  Ambev SA

Alfa SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Alfa SAB and Ambev SA

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

The idea behind Alfa SAB de and Ambev SA 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.