Correlation Between Banco Do and WEG SA
Can any of the company-specific risk be diversified away by investing in both Banco Do and WEG SA 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 WEG SA 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 WEG SA, you can compare the effects of market volatilities on Banco Do and WEG SA 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 WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and WEG SA.
Diversification Opportunities for Banco Do and WEG SA
Very good diversification
The 3 months correlation between Banco and WEG is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA 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 WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Banco Do i.e., Banco Do and WEG SA go up and down completely randomly.
Pair Corralation between Banco Do and WEG SA
Assuming the 90 days trading horizon Banco Do is expected to generate 9.53 times less return on investment than WEG SA. In addition to that, Banco Do is 1.19 times more volatile than WEG SA. It trades about 0.02 of its total potential returns per unit of risk. WEG SA is currently generating about 0.2 per unit of volatility. If you would invest 5,542 in WEG SA on September 13, 2024 and sell it today you would earn a total of 313.00 from holding WEG SA or generate 5.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Brasil vs. WEG SA
Performance |
| Timeline |
| Banco do Brasil |
| WEG SA |
Banco Do and WEG SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and WEG SA
The main advantage of trading using opposite Banco Do and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, WEG SA 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 WEG SA will offset losses from the drop in WEG SA'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 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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