Correlation Between Boston Beer and Ambipar Emergency

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

By analyzing existing cross correlation between Boston Beer and Ambipar Emergency Response, you can compare the effects of market volatilities on Boston Beer and Ambipar Emergency 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 Boston Beer with a short position of Ambipar Emergency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Ambipar Emergency.

Diversification Opportunities for Boston Beer and Ambipar Emergency

0.8

Correlation Coefficient

Boston Beer  Ambipar Emergency

Very poor diversification

The 3 months correlation between Boston and Ambipar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Boston Beer and Ambipar Emergency Response in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambipar Emergency and Boston Beer 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 Boston Beer are associated (or correlated) with Ambipar Emergency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambipar Emergency has no effect on the direction of Boston Beer i.e., Boston Beer and Ambipar Emergency go up and down completely randomly.

Pair Corralation between Boston Beer and Ambipar Emergency

Considering the 90-day investment horizon Boston Beer is expected to generate 0.53 times more return on investment than Ambipar Emergency. However, Boston Beer is 1.9 times less risky than Ambipar Emergency. It trades about -0.21 of its potential returns per unit of risk. Ambipar Emergency Response is currently generating about -0.14 per unit of risk. If you would invest  37,006  in Boston Beer on January 28, 2024 and sell it today you would lose (8,686) from holding Boston Beer or give up 23.47% of portfolio value over 90 days.

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

Boston Beer  vs.  Ambipar Emergency Response

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ambipar Emergency

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambipar Emergency Response has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Boston Beer and Ambipar Emergency

The main advantage of trading using opposite Boston Beer and Ambipar Emergency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer position performs unexpectedly, Ambipar Emergency 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 Ambipar Emergency will offset losses from the drop in Ambipar Emergency's long position.

The idea behind Boston Beer and Ambipar Emergency Response 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.