Correlation Between Banco BTG and Xp
Can any of the company-specific risk be diversified away by investing in both Banco BTG and Xp 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 Xp 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 Xp Inc, you can compare the effects of market volatilities on Banco BTG and Xp 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 Xp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Xp.
Diversification Opportunities for Banco BTG and Xp
Poor diversification
The 3 months correlation between Banco and Xp is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc 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 Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Banco BTG i.e., Banco BTG and Xp go up and down completely randomly.
Pair Corralation between Banco BTG and Xp
Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 0.86 times more return on investment than Xp. However, Banco BTG Pactual is 1.17 times less risky than Xp. It trades about -0.02 of its potential returns per unit of risk. Xp Inc is currently generating about -0.07 per unit of risk. If you would invest 3,185 in Banco BTG Pactual on September 2, 2024 and sell it today you would lose (157.00) from holding Banco BTG Pactual or give up 4.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. Xp Inc
Performance |
| Timeline |
| Banco BTG Pactual |
| Xp Inc |
Banco BTG and Xp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and Xp
The main advantage of trading using opposite Banco BTG and Xp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Xp 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 Xp will offset losses from the drop in Xp's long position.The idea behind Banco BTG Pactual and Xp Inc 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.| Xp vs. Dell Technologies | Xp vs. Fidelity National Information | Xp vs. Automatic Data Processing | Xp vs. Unity Software |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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