Correlation Between Banco Do and South Atlantic
Can any of the company-specific risk be diversified away by investing in both Banco Do and South Atlantic 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 South Atlantic 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 South Atlantic Bancshares, you can compare the effects of market volatilities on Banco Do and South Atlantic 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 South Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and South Atlantic.
Diversification Opportunities for Banco Do and South Atlantic
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Banco and South is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and South Atlantic Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Atlantic Bancshares 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 South Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Atlantic Bancshares has no effect on the direction of Banco Do i.e., Banco Do and South Atlantic go up and down completely randomly.
Pair Corralation between Banco Do and South Atlantic
Assuming the 90 days trading horizon Banco Do is expected to generate 2.33 times less return on investment than South Atlantic. But when comparing it to its historical volatility, Banco do Brasil is 1.25 times less risky than South Atlantic. It trades about 0.04 of its potential returns per unit of risk. South Atlantic Bancshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,062 in South Atlantic Bancshares on August 31, 2024 and sell it today you would earn a total of 478.00 from holding South Atlantic Bancshares or generate 45.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 89.07% |
| Values | Daily Returns |
Banco do Brasil vs. South Atlantic Bancshares
Performance |
| Timeline |
| Banco do Brasil |
| South Atlantic Bancshares |
Banco Do and South Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and South Atlantic
The main advantage of trading using opposite Banco Do and South Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, South Atlantic 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 South Atlantic will offset losses from the drop in South Atlantic'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 |
| South Atlantic vs. Fentura Financial | South Atlantic vs. Prime Meridian Holding | South Atlantic vs. Embassy Bancorp | South Atlantic vs. Freedom Bank of |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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