Correlation Between Americanas and The9

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Can any of the company-specific risk be diversified away by investing in both Americanas and The9 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 Americanas and The9 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Americanas SA ADR and The9 Ltd ADR, you can compare the effects of market volatilities on Americanas and The9 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 Americanas with a short position of The9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Americanas and The9.

Diversification Opportunities for Americanas and The9

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Americanas and The9 is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Americanas SA ADR and The9 Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The9 Ltd ADR and Americanas 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 Americanas SA ADR are associated (or correlated) with The9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The9 Ltd ADR has no effect on the direction of Americanas i.e., Americanas and The9 go up and down completely randomly.

Pair Corralation between Americanas and The9

Assuming the 90 days horizon Americanas SA ADR is expected to under-perform the The9. But the otc pink sheet apears to be less risky and, when comparing its historical volatility, Americanas SA ADR is 2.31 times less risky than The9. The otc pink sheet trades about -0.03 of its potential returns per unit of risk. The The9 Ltd ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  281.00  in The9 Ltd ADR on September 3, 2022 and sell it today you would lose (207.00)  from holding The9 Ltd ADR or give up 73.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Americanas SA ADR  vs.  The9 Ltd ADR

 Performance (%) 
       Timeline  
Americanas SA ADR 
Americanas Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Americanas SA ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Americanas showed solid returns over the last few months and may actually be approaching a breakup point.

Americanas Price Channel

The9 Ltd ADR 
The9 Performance
0 of 100
Over the last 90 days The9 Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

The9 Price Channel

Americanas and The9 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Americanas and The9

The main advantage of trading using opposite Americanas and The9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Americanas position performs unexpectedly, The9 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 The9 will offset losses from the drop in The9's long position.
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The idea behind Americanas SA ADR and The9 Ltd 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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