Correlation Between Pilgrims Pride and Ambev SA

Can any of the company-specific risk be diversified away by investing in both Pilgrims Pride 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 Pilgrims Pride and Ambev SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pilgrims Pride Corp and Ambev SA ADR, you can compare the effects of market volatilities on Pilgrims Pride 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 Pilgrims Pride with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilgrims Pride and Ambev SA.

Diversification Opportunities for Pilgrims Pride and Ambev SA

-0.8

Correlation Coefficient

Pilgrims Pride  Ambev SA

Pay attention - limited upside

The 3 months correlation between Pilgrims and Ambev is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pilgrims Pride Corp 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 Pilgrims Pride 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 Pilgrims Pride Corp 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 Pilgrims Pride i.e., Pilgrims Pride and Ambev SA go up and down completely randomly.

Pair Corralation between Pilgrims Pride and Ambev SA

Considering the 90-day investment horizon Pilgrims Pride Corp is expected to generate 0.78 times more return on investment than Ambev SA. However, Pilgrims Pride Corp is 1.28 times less risky than Ambev SA. It trades about 0.26 of its potential returns per unit of risk. Ambev SA ADR is currently generating about -0.06 per unit of risk. If you would invest  3,286  in Pilgrims Pride Corp on February 8, 2024 and sell it today you would earn a total of  369.00  from holding Pilgrims Pride Corp or generate 11.23% return on investment over 90 days.

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

Pilgrims Pride Corp  vs.  Ambev SA ADR

Pilgrims Pride Corp

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Pilgrims Pride exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Pilgrims Pride and Ambev SA

The main advantage of trading using opposite Pilgrims Pride and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pilgrims Pride 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.

The idea behind Pilgrims Pride Corp 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.