Correlation Between Banco Alfa and Financeira Alfa
Can any of the company-specific risk be diversified away by investing in both Banco Alfa and Financeira Alfa 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 Alfa and Financeira Alfa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Alfa de and Financeira Alfa SA, you can compare the effects of market volatilities on Banco Alfa and Financeira Alfa 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 Alfa with a short position of Financeira Alfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Alfa and Financeira Alfa.
Diversification Opportunities for Banco Alfa and Financeira Alfa
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Banco and Financeira is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Banco Alfa de and Financeira Alfa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financeira Alfa SA and Banco Alfa 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 Alfa de are associated (or correlated) with Financeira Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financeira Alfa SA has no effect on the direction of Banco Alfa i.e., Banco Alfa and Financeira Alfa go up and down completely randomly.
Pair Corralation between Banco Alfa and Financeira Alfa
Assuming the 90 days trading horizon Banco Alfa de is expected to generate 0.9 times more return on investment than Financeira Alfa. However, Banco Alfa de is 1.12 times less risky than Financeira Alfa. It trades about 0.05 of its potential returns per unit of risk. Financeira Alfa SA is currently generating about 0.04 per unit of risk. If you would invest 915.00 in Banco Alfa de on August 29, 2024 and sell it today you would earn a total of 371.00 from holding Banco Alfa de or generate 40.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Banco Alfa de vs. Financeira Alfa SA
Performance |
| Timeline |
| Banco Alfa de |
| Financeira Alfa SA |
Banco Alfa and Financeira Alfa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Alfa and Financeira Alfa
The main advantage of trading using opposite Banco Alfa and Financeira Alfa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Alfa position performs unexpectedly, Financeira Alfa 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 Financeira Alfa will offset losses from the drop in Financeira Alfa's long position.| Banco Alfa vs. Banco Alfa de | Banco Alfa vs. Banestes SA | Banco Alfa vs. Banco da Amaznia | Banco Alfa vs. Financeira Alfa SA |
| Financeira Alfa vs. Banco Alfa de | Financeira Alfa vs. Financeira Alfa SA | Financeira Alfa vs. Banco Alfa de | Financeira Alfa vs. Banestes 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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