Correlation Between BBVA Banco and Distribuidora
Can any of the company-specific risk be diversified away by investing in both BBVA Banco and Distribuidora 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 BBVA Banco and Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and Distribuidora de Gas, you can compare the effects of market volatilities on BBVA Banco and Distribuidora 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 BBVA Banco with a short position of Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Distribuidora.
Diversification Opportunities for BBVA Banco and Distribuidora
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BBVA and Distribuidora is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Distribuidora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribuidora de Gas and BBVA Banco 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 BBVA Banco Frances are associated (or correlated) with Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribuidora de Gas has no effect on the direction of BBVA Banco i.e., BBVA Banco and Distribuidora go up and down completely randomly.
Pair Corralation between BBVA Banco and Distribuidora
Assuming the 90 days trading horizon BBVA Banco is expected to generate 2.01 times less return on investment than Distribuidora. But when comparing it to its historical volatility, BBVA Banco Frances is 1.08 times less risky than Distribuidora. It trades about 0.26 of its potential returns per unit of risk. Distribuidora de Gas is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 141,000 in Distribuidora de Gas on August 28, 2024 and sell it today you would earn a total of 47,000 from holding Distribuidora de Gas or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BBVA Banco Frances vs. Distribuidora de Gas
Performance |
| Timeline |
| BBVA Banco Frances |
| Distribuidora de Gas |
BBVA Banco and Distribuidora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Banco and Distribuidora
The main advantage of trading using opposite BBVA Banco and Distribuidora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, Distribuidora 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 Distribuidora will offset losses from the drop in Distribuidora's long position.| BBVA Banco vs. Pampa Energia SA | BBVA Banco vs. American Express Co | BBVA Banco vs. United States Steel | BBVA Banco vs. Pfizer Inc |
| Distribuidora vs. Agrometal SAI | Distribuidora vs. Transportadora de Gas | Distribuidora vs. Harmony Gold Mining | Distribuidora vs. Compania de Transporte |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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