Correlation Between Ambev SA and Tsingtao Brewery

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

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

Diversification Opportunities for Ambev SA and Tsingtao Brewery

0.47

Correlation Coefficient

Ambev SA  Tsingtao Brewery

Very weak diversification

The 3 months correlation between Ambev and Tsingtao is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Ambev SA i.e., Ambev SA and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Ambev SA and Tsingtao Brewery

Assuming the 90 days trading horizon Ambev SA is expected to generate 20.56 times less return on investment than Tsingtao Brewery. But when comparing it to its historical volatility, Ambev SA is 1.06 times less risky than Tsingtao Brewery. It trades about 0.01 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  565.00  in Tsingtao Brewery on September 25, 2024 and sell it today you would earn a total of  90.00  from holding Tsingtao Brewery or generate 15.93% return on investment over 90 days.

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

Ambev SA  vs.  Tsingtao Brewery

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. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tsingtao Brewery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Tsingtao Brewery

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

The idea behind Ambev SA and Tsingtao Brewery 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.