Correlation Between Banco Do and Traditions Bank
Can any of the company-specific risk be diversified away by investing in both Banco Do and Traditions Bank 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 Traditions Bank 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 Traditions Bank, you can compare the effects of market volatilities on Banco Do and Traditions Bank 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 Traditions Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Traditions Bank.
Diversification Opportunities for Banco Do and Traditions Bank
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Banco and Traditions is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions 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 Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of Banco Do i.e., Banco Do and Traditions Bank go up and down completely randomly.
Pair Corralation between Banco Do and Traditions Bank
Assuming the 90 days trading horizon Banco Do is expected to generate 1.16 times less return on investment than Traditions Bank. But when comparing it to its historical volatility, Banco do Brasil is 1.5 times less risky than Traditions Bank. It trades about 0.06 of its potential returns per unit of risk. Traditions Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,845 in Traditions Bank on August 26, 2024 and sell it today you would earn a total of 1,435 from holding Traditions Bank or generate 77.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Banco do Brasil vs. Traditions Bank
Performance |
| Timeline |
| Banco do Brasil |
| Traditions Bank |
Banco Do and Traditions Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Traditions Bank
The main advantage of trading using opposite Banco Do and Traditions Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Traditions Bank 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 Traditions Bank will offset losses from the drop in Traditions Bank'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 |
| Traditions Bank vs. Standard Bank Group | Traditions Bank vs. PSB Holdings | Traditions Bank vs. United Overseas Bank | Traditions Bank 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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