Correlation Between Grendene and Ambev SA

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

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

Diversification Opportunities for Grendene and Ambev SA

0.18

Correlation Coefficient

Grendene  Ambev SA

Average diversification

The 3 months correlation between Grendene and Ambev is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Grendene 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 Grendene SA 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 Grendene i.e., Grendene and Ambev SA go up and down completely randomly.

Pair Corralation between Grendene and Ambev SA

Assuming the 90 days trading horizon Grendene SA is expected to under-perform the Ambev SA. In addition to that, Grendene is 1.26 times more volatile than Ambev SA. It trades about -0.06 of its total potential returns per unit of risk. Ambev SA is currently generating about 0.12 per unit of volatility. If you would invest  1,291  in Ambev SA on September 12, 2024 and sell it today you would earn a total of  136.00  from holding Ambev SA or generate 10.53% return on investment over 90 days.

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

Grendene SA  vs.  Ambev SA

Grendene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grendene SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ambev SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambev SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Grendene and Ambev SA

The main advantage of trading using opposite Grendene and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene 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 Grendene SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.