Correlation Between Banco Do and Bankinter
Can any of the company-specific risk be diversified away by investing in both Banco Do and Bankinter 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 Do and Bankinter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco do Brasil and Bankinter SA ADR, you can compare the effects of market volatilities on Banco Do and Bankinter 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 Do with a short position of Bankinter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Bankinter.
Diversification Opportunities for Banco Do and Bankinter
Very poor diversification
The 3 months correlation between Banco and Bankinter is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Bankinter SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankinter SA ADR and Banco Do 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 do Brasil are associated (or correlated) with Bankinter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankinter SA ADR has no effect on the direction of Banco Do i.e., Banco Do and Bankinter go up and down completely randomly.
Pair Corralation between Banco Do and Bankinter
Assuming the 90 days trading horizon Banco do Brasil is expected to generate 0.32 times more return on investment than Bankinter. However, Banco do Brasil is 3.17 times less risky than Bankinter. It trades about -0.15 of its potential returns per unit of risk. Bankinter SA ADR is currently generating about -0.05 per unit of risk. If you would invest 2,637 in Banco do Brasil on August 26, 2024 and sell it today you would lose (77.00) from holding Banco do Brasil or give up 2.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.91% |
| Values | Daily Returns |
Banco do Brasil vs. Bankinter SA ADR
Performance |
| Timeline |
| Banco do Brasil |
| Bankinter SA ADR |
Banco Do and Bankinter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Bankinter
The main advantage of trading using opposite Banco Do and Bankinter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Bankinter 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 Bankinter will offset losses from the drop in Bankinter's long position.| Banco Do vs. Banco Alfa de | Banco Do vs. Financeira Alfa SA | Banco Do vs. Banco Alfa de | Banco Do vs. Financeira Alfa 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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