Correlation Between Bank Of and EZTEC Empreendimentos
Can any of the company-specific risk be diversified away by investing in both Bank Of and EZTEC Empreendimentos 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 Bank Of and EZTEC Empreendimentos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Bank of and EZTEC Empreendimentos e, you can compare the effects of market volatilities on Bank Of and EZTEC Empreendimentos 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 Bank Of with a short position of EZTEC Empreendimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Of and EZTEC Empreendimentos.
Diversification Opportunities for Bank Of and EZTEC Empreendimentos
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and EZTEC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and EZTEC Empreendimentos e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZTEC Empreendimentos and Bank Of 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 The Bank of are associated (or correlated) with EZTEC Empreendimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZTEC Empreendimentos has no effect on the direction of Bank Of i.e., Bank Of and EZTEC Empreendimentos go up and down completely randomly.
Pair Corralation between Bank Of and EZTEC Empreendimentos
Assuming the 90 days trading horizon The Bank of is expected to generate 0.52 times more return on investment than EZTEC Empreendimentos. However, The Bank of is 1.92 times less risky than EZTEC Empreendimentos. It trades about 0.29 of its potential returns per unit of risk. EZTEC Empreendimentos e is currently generating about 0.15 per unit of risk. If you would invest 44,176 in The Bank of on August 30, 2024 and sell it today you would earn a total of 4,047 from holding The Bank of or generate 9.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Bank of vs. EZTEC Empreendimentos e
Performance |
| Timeline |
| The Bank |
| EZTEC Empreendimentos |
Bank Of and EZTEC Empreendimentos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Of and EZTEC Empreendimentos
The main advantage of trading using opposite Bank Of and EZTEC Empreendimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Of position performs unexpectedly, EZTEC Empreendimentos 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 EZTEC Empreendimentos will offset losses from the drop in EZTEC Empreendimentos' long position.The idea behind The Bank of and EZTEC Empreendimentos e 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.| EZTEC Empreendimentos vs. MRV Engenharia e | EZTEC Empreendimentos vs. Cyrela Brazil Realty | EZTEC Empreendimentos vs. Grendene SA | EZTEC Empreendimentos vs. Fleury 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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