Correlation Between Banco BTG and B3 SA
Can any of the company-specific risk be diversified away by investing in both Banco BTG and B3 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 BTG and B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco BTG Pactual and B3 SA , you can compare the effects of market volatilities on Banco BTG and B3 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 BTG with a short position of B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and B3 SA.
Diversification Opportunities for Banco BTG and B3 SA
Very poor diversification
The 3 months correlation between Banco and B3SA3 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 SA and Banco BTG 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 BTG Pactual are associated (or correlated) with B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of Banco BTG i.e., Banco BTG and B3 SA go up and down completely randomly.
Pair Corralation between Banco BTG and B3 SA
Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 0.89 times more return on investment than B3 SA. However, Banco BTG Pactual is 1.13 times less risky than B3 SA. It trades about 0.05 of its potential returns per unit of risk. B3 SA is currently generating about -0.01 per unit of risk. If you would invest 3,118 in Banco BTG Pactual on August 28, 2024 and sell it today you would earn a total of 264.00 from holding Banco BTG Pactual or generate 8.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. B3 SA
Performance |
| Timeline |
| Banco BTG Pactual |
| B3 SA |
Banco BTG and B3 SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and B3 SA
The main advantage of trading using opposite Banco BTG and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, B3 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 B3 SA will offset losses from the drop in B3 SA's long position.The idea behind Banco BTG Pactual and B3 SA 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.| B3 SA vs. Banco Alfa de | B3 SA vs. Financeira Alfa SA | B3 SA vs. Banco Alfa de | B3 SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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