Correlation Between Visa and Ambev SA

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

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

Diversification Opportunities for Visa and Ambev SA

-0.62

Correlation Coefficient

Visa  Ambev SA

Excellent diversification

The 3 months correlation between Visa and Ambev is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA and Visa 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 Visa Class A 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 Visa i.e., Visa and Ambev SA go up and down completely randomly.

Pair Corralation between Visa and Ambev SA

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.77 times more return on investment than Ambev SA. However, Visa Class A is 1.29 times less risky than Ambev SA. It trades about 0.34 of its potential returns per unit of risk. Ambev SA is currently generating about 0.15 per unit of risk. If you would invest  29,129  in Visa Class A on September 4, 2024 and sell it today you would earn a total of  2,536  from holding Visa Class A or generate 8.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Ambev SA

Visa Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ambev SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Visa and Ambev SA

The main advantage of trading using opposite Visa and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.