Correlation Between Sphere Entertainment and Ambev SA

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

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

Diversification Opportunities for Sphere Entertainment and Ambev SA

0.36

Correlation Coefficient

Sphere Entertainment  Ambev SA

Weak diversification

The 3 months correlation between Sphere and Ambev is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Ambev SA go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Ambev SA

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Ambev SA. In addition to that, Sphere Entertainment is 1.87 times more volatile than Ambev SA ADR. It trades about -0.03 of its total potential returns per unit of risk. Ambev SA ADR is currently generating about -0.05 per unit of volatility. If you would invest  232.00  in Ambev SA ADR on September 4, 2024 and sell it today you would lose (13.00) from holding Ambev SA ADR or give up 5.6% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Ambev SA ADR

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail 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 Sphere Entertainment and Ambev SA

The main advantage of trading using opposite Sphere Entertainment and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.