Correlation Between Hudson Technologies and Ambev SA

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

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

Diversification Opportunities for Hudson Technologies and Ambev SA

0.62

Correlation Coefficient

Hudson Technologies  Ambev SA

Poor diversification

The 3 months correlation between Hudson and Ambev is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies 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 Hudson Technologies 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 Hudson Technologies 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 Hudson Technologies i.e., Hudson Technologies and Ambev SA go up and down completely randomly.

Pair Corralation between Hudson Technologies and Ambev SA

Given the investment horizon of 90 days Hudson Technologies is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, Hudson Technologies is 1.33 times less risky than Ambev SA. The stock trades about -0.25 of its potential returns per unit of risk. The Ambev SA ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Hudson Technologies  vs.  Ambev SA ADR

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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.

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 Hudson Technologies and Ambev SA

The main advantage of trading using opposite Hudson Technologies and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Technologies 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 Hudson Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.