Correlation Between Budweiser Brewing and Ambev SA

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

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

Diversification Opportunities for Budweiser Brewing and Ambev SA

0.54

Correlation Coefficient

Budweiser Brewing  Ambev SA

Very weak diversification

The 3 months correlation between Budweiser and Ambev is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Budweiser Brewing and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Budweiser Brewing 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 Budweiser Brewing 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 ADR has no effect on the direction of Budweiser Brewing i.e., Budweiser Brewing and Ambev SA go up and down completely randomly.

Pair Corralation between Budweiser Brewing and Ambev SA

Assuming the 90 days horizon Budweiser Brewing is expected to generate 4.51 times more return on investment than Ambev SA. However, Budweiser Brewing is 4.51 times more volatile than Ambev SA ADR. It trades about -0.01 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.06 per unit of risk. If you would invest  111.00  in Budweiser Brewing on September 1, 2024 and sell it today you would lose (18.00) from holding Budweiser Brewing or give up 16.22% of portfolio value over 90 days.

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

Budweiser Brewing  vs.  Ambev SA ADR

Budweiser Brewing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Budweiser Brewing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Budweiser Brewing is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Budweiser Brewing and Ambev SA

The main advantage of trading using opposite Budweiser Brewing and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budweiser Brewing 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 Budweiser Brewing and Ambev SA ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.