Correlation Between Banco ABC and Banco Do
Can any of the company-specific risk be diversified away by investing in both Banco ABC and Banco Do 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 Banco ABC and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco ABC Brasil and Banco do Estado, you can compare the effects of market volatilities on Banco ABC and Banco Do 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 Banco ABC with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco ABC and Banco Do.
Diversification Opportunities for Banco ABC and Banco Do
Poor diversification
The 3 months correlation between Banco and Banco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Banco ABC Brasil and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and Banco ABC 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 Banco ABC Brasil are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of Banco ABC i.e., Banco ABC and Banco Do go up and down completely randomly.
Pair Corralation between Banco ABC and Banco Do
Assuming the 90 days trading horizon Banco ABC Brasil is expected to generate 0.72 times more return on investment than Banco Do. However, Banco ABC Brasil is 1.38 times less risky than Banco Do. It trades about 0.17 of its potential returns per unit of risk. Banco do Estado is currently generating about 0.07 per unit of risk. If you would invest 1,918 in Banco ABC Brasil on November 3, 2024 and sell it today you would earn a total of 99.00 from holding Banco ABC Brasil or generate 5.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco ABC Brasil vs. Banco do Estado
Performance |
| Timeline |
| Banco ABC Brasil |
| Banco do Estado |
Banco ABC and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco ABC and Banco Do
The main advantage of trading using opposite Banco ABC and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco ABC position performs unexpectedly, Banco Do 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 Banco Do will offset losses from the drop in Banco Do's long position.| Banco ABC vs. Banco do Estado | Banco ABC vs. MAHLE Metal Leve | Banco ABC vs. Tupy SA | Banco ABC vs. BB Seguridade Participacoes |
| Banco Do vs. BB Seguridade Participacoes | Banco Do vs. Banco ABC Brasil | Banco Do vs. Companhia de Saneamento | Banco Do vs. CTEEP Companhia |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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