Correlation Between Ambev SA and BRF SA
Can any of the company-specific risk be diversified away by investing in both Ambev SA and BRF 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 Ambev SA and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ambev SA ADR and BRF SA ADR, you can compare the effects of market volatilities on Ambev SA and BRF 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 Ambev SA with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and BRF SA.
Diversification Opportunities for Ambev SA and BRF SA
Excellent diversification
The 3 months correlation between Ambev and BRF is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR and Ambev SA 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 Ambev SA ADR are associated (or correlated) with BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of Ambev SA i.e., Ambev SA and BRF SA go up and down completely randomly.
Pair Corralation between Ambev SA and BRF SA
Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the BRF SA. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 2.26 times less risky than BRF SA. The stock trades about -0.3 of its potential returns per unit of risk. The BRF SA ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 338.00 in BRF SA ADR on January 20, 2024 and sell it today you would lose (10.00) from holding BRF SA ADR or give up 2.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.65% |
Values | Daily Returns |
Ambev SA ADR vs. BRF SA ADR
Performance |
Timeline |
Ambev SA ADR |
BRF SA ADR |
Ambev SA and BRF SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ambev SA and BRF SA
The main advantage of trading using opposite Ambev SA and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, BRF 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 BRF SA will offset losses from the drop in BRF SA's long position.Ambev SA vs. Molson Coors Beverage | Ambev SA vs. Heineken NV | Ambev SA vs. Budweiser Brewing | Ambev SA vs. Anheuser Busch InBev SANV |
BRF SA vs. Green Globe International | BRF SA vs. Greenlane Holdings | BRF SA vs. 22nd Century Group | BRF SA vs. 1606 Corp |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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