Correlation Between Banestes and Banco ABC
Can any of the company-specific risk be diversified away by investing in both Banestes and Banco ABC 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 Banestes and Banco ABC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banestes SA and Banco ABC Brasil, you can compare the effects of market volatilities on Banestes and Banco ABC 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 Banestes with a short position of Banco ABC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banestes and Banco ABC.
Diversification Opportunities for Banestes and Banco ABC
Weak diversification
The 3 months correlation between Banestes and Banco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Banestes SA and Banco ABC Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco ABC Brasil and Banestes 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 Banestes SA are associated (or correlated) with Banco ABC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco ABC Brasil has no effect on the direction of Banestes i.e., Banestes and Banco ABC go up and down completely randomly.
Pair Corralation between Banestes and Banco ABC
Assuming the 90 days trading horizon Banestes SA is expected to under-perform the Banco ABC. But the preferred stock apears to be less risky and, when comparing its historical volatility, Banestes SA is 1.9 times less risky than Banco ABC. The preferred stock trades about -0.1 of its potential returns per unit of risk. The Banco ABC Brasil is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,899 in Banco ABC Brasil on November 4, 2024 and sell it today you would earn a total of 118.00 from holding Banco ABC Brasil or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banestes SA vs. Banco ABC Brasil
Performance |
| Timeline |
| Banestes SA |
| Banco ABC Brasil |
Banestes and Banco ABC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banestes and Banco ABC
The main advantage of trading using opposite Banestes and Banco ABC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banestes position performs unexpectedly, Banco ABC 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 Banco ABC will offset losses from the drop in Banco ABC's long position.| Banestes vs. Banestes SA | Banestes vs. Banco Mercantil do | Banestes vs. Banco do Estado | Banestes vs. Banco da Amaznia |
| Banco ABC vs. Banco do Estado | Banco ABC vs. MAHLE Metal Leve | Banco ABC vs. Tupy SA | Banco ABC vs. BB Seguridade Participacoes |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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