Correlation Between American Funds and Banco Do
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Banco do Estado, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Banco Do.
Diversification Opportunities for American Funds and Banco Do
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Banco is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental 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 American Funds 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 American Funds Fundamental 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 American Funds i.e., American Funds and Banco Do go up and down completely randomly.
Pair Corralation between American Funds and Banco Do
Assuming the 90 days horizon American Funds Fundamental is expected to generate 0.52 times more return on investment than Banco Do. However, American Funds Fundamental is 1.94 times less risky than Banco Do. It trades about 0.2 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 8,096 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 322.00 from holding American Funds Fundamental or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
American Funds Fundamental vs. Banco do Estado
Performance |
| Timeline |
| American Funds Funda |
| Banco do Estado |
American Funds and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Banco Do
The main advantage of trading using opposite American Funds and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. World Energy Fund | American Funds vs. Energy Services Fund | American Funds vs. Alpsalerian Energy Infrastructure | American Funds vs. Icon Natural Resources |
| 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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