Correlation Between Banco Do and Hang Seng
Can any of the company-specific risk be diversified away by investing in both Banco Do and Hang Seng 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 Hang Seng 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 Hang Seng Bank, you can compare the effects of market volatilities on Banco Do and Hang Seng 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 Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Hang Seng.
Diversification Opportunities for Banco Do and Hang Seng
Excellent diversification
The 3 months correlation between Banco and Hang is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Banco Do i.e., Banco Do and Hang Seng go up and down completely randomly.
Pair Corralation between Banco Do and Hang Seng
Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Hang Seng. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 1.86 times less risky than Hang Seng. The stock trades about -0.19 of its potential returns per unit of risk. The Hang Seng Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,148 in Hang Seng Bank on August 25, 2024 and sell it today you would earn a total of 57.00 from holding Hang Seng Bank or generate 4.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.56% |
| Values | Daily Returns |
Banco do Brasil vs. Hang Seng Bank
Performance |
| Timeline |
| Banco do Brasil |
| Hang Seng Bank |
Banco Do and Hang Seng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Hang Seng
The main advantage of trading using opposite Banco Do and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Hang Seng 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 Hang Seng will offset losses from the drop in Hang Seng's long position.| Banco Do vs. Banco Bradesco SA | Banco Do vs. Petrleo Brasileiro SA | Banco Do vs. Ita Unibanco Holding | Banco Do vs. Itasa Investimentos |
| Hang Seng vs. Standard Bank Group | Hang Seng vs. PSB Holdings | Hang Seng vs. United Overseas Bank | Hang Seng vs. Turkiye Garanti Bankasi |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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