Correlation Between Banco Do and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Banco Do and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp PR, you can compare the effects of market volatilities on Banco Do and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Merchants Bancorp.
Diversification Opportunities for Banco Do and Merchants Bancorp
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banco and Merchants is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Merchants Bancorp PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Banco Do i.e., Banco Do and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Banco Do and Merchants Bancorp
Assuming the 90 days trading horizon Banco do Brasil is expected to generate 1.12 times more return on investment than Merchants Bancorp. However, Banco Do is 1.12 times more volatile than Merchants Bancorp PR. It trades about 0.07 of its potential returns per unit of risk. Merchants Bancorp PR is currently generating about 0.0 per unit of risk. If you would invest 1,436 in Banco do Brasil on August 29, 2024 and sell it today you would earn a total of 1,131 from holding Banco do Brasil or generate 78.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 31.26% |
| Values | Daily Returns |
Banco do Brasil vs. Merchants Bancorp PR
Performance |
| Timeline |
| Banco do Brasil |
| Merchants Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Banco Do and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Merchants Bancorp
The main advantage of trading using opposite Banco Do and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp'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 |
| Merchants Bancorp vs. Merchants Bancorp | Merchants Bancorp vs. Valley National Bancorp | Merchants Bancorp vs. Valley National Bancorp | Merchants Bancorp vs. Wintrust Financial Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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