Correlation Between FP Newspapers and Ambev SA

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

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

Diversification Opportunities for FP Newspapers and Ambev SA

0.04

Correlation Coefficient

FP Newspapers  Ambev SA

Significant diversification

The 3 months correlation between FPNUF and Ambev is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FP Newspapers 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 FP Newspapers 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 FP Newspapers 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 FP Newspapers i.e., FP Newspapers and Ambev SA go up and down completely randomly.

Pair Corralation between FP Newspapers and Ambev SA

Assuming the 90 days horizon FP Newspapers is expected to under-perform the Ambev SA. In addition to that, FP Newspapers is 3.82 times more volatile than Ambev SA ADR. It trades about -0.22 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about -0.03 per unit of volatility. If you would invest  222.00  in Ambev SA ADR on September 14, 2024 and sell it today you would lose (4.00) from holding Ambev SA ADR or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

FP Newspapers  vs.  Ambev SA ADR

FP Newspapers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FP Newspapers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 FP Newspapers and Ambev SA

The main advantage of trading using opposite FP Newspapers and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FP Newspapers 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 FP Newspapers 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.