Correlation Between Ambev SA and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both Ambev SA and Imperial Brands 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 Imperial Brands 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 Imperial Brands PLC, you can compare the effects of market volatilities on Ambev SA and Imperial Brands 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 Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Imperial Brands.
Diversification Opportunities for Ambev SA and Imperial Brands
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ambev and Imperial is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC 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 Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Ambev SA i.e., Ambev SA and Imperial Brands go up and down completely randomly.
Pair Corralation between Ambev SA and Imperial Brands
Given the investment horizon of 90 days Ambev SA is expected to generate 4.2 times less return on investment than Imperial Brands. In addition to that, Ambev SA is 1.34 times more volatile than Imperial Brands PLC. It trades about 0.01 of its total potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.04 per unit of volatility. If you would invest 1,789 in Imperial Brands PLC on January 26, 2024 and sell it today you would earn a total of 501.00 from holding Imperial Brands PLC or generate 28.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Ambev SA ADR vs. Imperial Brands PLC
Performance |
Timeline |
Ambev SA ADR |
Imperial Brands PLC |
Ambev SA and Imperial Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ambev SA and Imperial Brands
The main advantage of trading using opposite Ambev SA and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA position performs unexpectedly, Imperial Brands 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 Imperial Brands will offset losses from the drop in Imperial Brands' 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 |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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