Correlation Between Banco ABC and Itasa Investimentos
Can any of the company-specific risk be diversified away by investing in both Banco ABC and Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos, you can compare the effects of market volatilities on Banco ABC and Itasa Investimentos 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 Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco ABC and Itasa Investimentos.
Diversification Opportunities for Banco ABC and Itasa Investimentos
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and Itasa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Banco ABC Brasil and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos 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 Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Banco ABC i.e., Banco ABC and Itasa Investimentos go up and down completely randomly.
Pair Corralation between Banco ABC and Itasa Investimentos
Assuming the 90 days trading horizon Banco ABC Brasil is expected to generate 1.55 times more return on investment than Itasa Investimentos. However, Banco ABC is 1.55 times more volatile than Itasa Investimentos. It trades about 0.04 of its potential returns per unit of risk. Itasa Investimentos is currently generating about 0.05 per unit of risk. If you would invest 1,635 in Banco ABC Brasil on September 2, 2024 and sell it today you would earn a total of 388.00 from holding Banco ABC Brasil or generate 23.73% 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. Itasa Investimentos
Performance |
| Timeline |
| Banco ABC Brasil |
| Itasa Investimentos |
Banco ABC and Itasa Investimentos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco ABC and Itasa Investimentos
The main advantage of trading using opposite Banco ABC and Itasa Investimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco ABC position performs unexpectedly, Itasa Investimentos 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 Itasa Investimentos will offset losses from the drop in Itasa Investimentos' long position.| Banco ABC vs. Banco do Brasil | Banco ABC vs. Banco Bradesco SA | Banco ABC vs. Petrleo Brasileiro SA | Banco ABC vs. BB Seguridade Participacoes |
| Itasa Investimentos vs. Banco do Brasil | Itasa Investimentos vs. Banco Bradesco SA | Itasa Investimentos vs. Ita Unibanco Holding | Itasa Investimentos vs. Petrleo Brasileiro SA |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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