Correlation Between Baidu and Banco Do
Can any of the company-specific risk be diversified away by investing in both Baidu and Banco Do 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 Baidu and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Banco do Estado, you can compare the effects of market volatilities on Baidu and Banco Do 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 Baidu with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Banco Do.
Diversification Opportunities for Baidu and Banco Do
Good diversification
The 3 months correlation between Baidu and Banco is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and Baidu 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 Baidu Inc are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of Baidu i.e., Baidu and Banco Do go up and down completely randomly.
Pair Corralation between Baidu and Banco Do
Assuming the 90 days trading horizon Baidu Inc is expected to under-perform the Banco Do. In addition to that, Baidu is 1.0 times more volatile than Banco do Estado. It trades about -0.21 of its total potential returns per unit of risk. Banco do Estado is currently generating about 0.0 per unit of volatility. If you would invest 2,385 in Banco do Estado on August 28, 2024 and sell it today you would lose (9.00) from holding Banco do Estado or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Banco do Estado
Performance |
| Timeline |
| Baidu Inc |
| Banco do Estado |
Baidu and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Banco Do
The main advantage of trading using opposite Baidu and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu position performs unexpectedly, Banco Do 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 Do will offset losses from the drop in Banco Do's long position.The idea behind Baidu Inc and Banco do Estado pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Banco Do vs. Banco Alfa de | Banco Do vs. Banestes SA | Banco Do vs. Banco da Amaznia | Banco Do vs. Financeira Alfa SA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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