Correlation Between Banco Do and Banco Mercantil
Can any of the company-specific risk be diversified away by investing in both Banco Do and Banco Mercantil 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 Do and Banco Mercantil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco do Estado and Banco Mercantil do, you can compare the effects of market volatilities on Banco Do and Banco Mercantil 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 Do with a short position of Banco Mercantil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Banco Mercantil.
Diversification Opportunities for Banco Do and Banco Mercantil
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Banco and Banco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Banco Mercantil do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Mercantil do and Banco Do 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 do Estado are associated (or correlated) with Banco Mercantil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Mercantil do has no effect on the direction of Banco Do i.e., Banco Do and Banco Mercantil go up and down completely randomly.
Pair Corralation between Banco Do and Banco Mercantil
Assuming the 90 days trading horizon Banco Do is expected to generate 1.31 times less return on investment than Banco Mercantil. But when comparing it to its historical volatility, Banco do Estado is 2.11 times less risky than Banco Mercantil. It trades about 0.04 of its potential returns per unit of risk. Banco Mercantil do is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,060 in Banco Mercantil do on August 27, 2024 and sell it today you would earn a total of 15.00 from holding Banco Mercantil do or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Banco Mercantil do
Performance |
| Timeline |
| Banco do Estado |
| Banco Mercantil do |
Banco Do and Banco Mercantil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Banco Mercantil
The main advantage of trading using opposite Banco Do and Banco Mercantil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Banco Mercantil 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 Banco Mercantil will offset losses from the drop in Banco Mercantil's long position.| Banco Do vs. Banco Santander SA | Banco Do vs. Itasa Investimentos | Banco Do vs. Banco do Estado | Banco Do vs. Banco da Amaznia |
| Banco Mercantil vs. Banco Mercantil do | Banco Mercantil vs. Banestes SA | Banco Mercantil vs. Banco da Amaznia | Banco Mercantil vs. Banco Alfa de |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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