Correlation Between Banco BTG and Alfa Holdings
Can any of the company-specific risk be diversified away by investing in both Banco BTG and Alfa Holdings 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 Alfa Holdings 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 Alfa Holdings SA, you can compare the effects of market volatilities on Banco BTG and Alfa Holdings 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 Alfa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Alfa Holdings.
Diversification Opportunities for Banco BTG and Alfa Holdings
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Banco and Alfa is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Alfa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Holdings 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 Alfa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Holdings SA has no effect on the direction of Banco BTG i.e., Banco BTG and Alfa Holdings go up and down completely randomly.
Pair Corralation between Banco BTG and Alfa Holdings
Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 0.35 times more return on investment than Alfa Holdings. However, Banco BTG Pactual is 2.86 times less risky than Alfa Holdings. It trades about 0.05 of its potential returns per unit of risk. Alfa Holdings SA is currently generating about -0.32 per unit of risk. If you would invest 3,328 in Banco BTG Pactual on August 29, 2024 and sell it today you would earn a total of 54.00 from holding Banco BTG Pactual or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. Alfa Holdings SA
Performance |
| Timeline |
| Banco BTG Pactual |
| Alfa Holdings SA |
Banco BTG and Alfa Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and Alfa Holdings
The main advantage of trading using opposite Banco BTG and Alfa Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Alfa Holdings 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 Alfa Holdings will offset losses from the drop in Alfa Holdings' long position.The idea behind Banco BTG Pactual and Alfa Holdings 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.| Alfa Holdings vs. Ambipar Participaes e | Alfa Holdings vs. Movida Participaes SA | Alfa Holdings vs. Banco BTG Pactual | Alfa Holdings vs. BTG Pactual Logstica |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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