Correlation Between Banco BTG and Charles Schwab
Can any of the company-specific risk be diversified away by investing in both Banco BTG and Charles Schwab 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 Charles Schwab 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 The Charles Schwab, you can compare the effects of market volatilities on Banco BTG and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Charles Schwab.
Diversification Opportunities for Banco BTG and Charles Schwab
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and Charles is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Banco BTG i.e., Banco BTG and Charles Schwab go up and down completely randomly.
Pair Corralation between Banco BTG and Charles Schwab
Assuming the 90 days trading horizon Banco BTG is expected to generate 46.59 times less return on investment than Charles Schwab. But when comparing it to its historical volatility, Banco BTG Pactual is 1.15 times less risky than Charles Schwab. It trades about 0.01 of its potential returns per unit of risk. The Charles Schwab is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 5,124 in The Charles Schwab on August 27, 2024 and sell it today you would earn a total of 793.00 from holding The Charles Schwab or generate 15.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. The Charles Schwab
Performance |
| Timeline |
| Banco BTG Pactual |
| Charles Schwab |
Banco BTG and Charles Schwab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and Charles Schwab
The main advantage of trading using opposite Banco BTG and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.The idea behind Banco BTG Pactual and The Charles Schwab 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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