Correlation Between Coca Cola and Ambev SA

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

Diversification Opportunities for Coca Cola and Ambev SA

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Coca Cola and Ambev is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Coca Cola 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 Coca-Cola 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 ADR has no effect on the direction of Coca Cola i.e., Coca Cola and Ambev SA go up and down completely randomly.

Pair Corralation between Coca Cola and Ambev SA

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.76 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Coca-Cola is 2.09 times less risky than Ambev SA. It trades about 0.04 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Ambev SA ADR on June 26, 2022 and sell it today you would earn a total of  72.00  from holding Ambev SA ADR or generate 33.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Ambev SA ADR

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Coca Cola Price Channel

Ambev SA ADR 
Ambev Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish technical and fundamental indicators, Ambev SA may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Ambev Price Channel

Coca Cola and Ambev SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Ambev SA

The main advantage of trading using opposite Coca Cola and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.
Coca Cola vs. Industrias Bachoco SA
The idea behind Coca-Cola and Ambev SA 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.
Ambev SA vs. Sigma Lithium 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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