Correlation Between Banco Do and Lam Research
Can any of the company-specific risk be diversified away by investing in both Banco Do and Lam Research 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 Lam Research 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 Lam Research, you can compare the effects of market volatilities on Banco Do and Lam Research 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 Lam Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Lam Research.
Diversification Opportunities for Banco Do and Lam Research
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Banco and Lam is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Lam Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Research 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 Lam Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Research has no effect on the direction of Banco Do i.e., Banco Do and Lam Research go up and down completely randomly.
Pair Corralation between Banco Do and Lam Research
Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.81 times more return on investment than Lam Research. However, Banco do Estado is 1.24 times less risky than Lam Research. It trades about -0.01 of its potential returns per unit of risk. Lam Research is currently generating about -0.11 per unit of risk. If you would invest 1,681 in Banco do Estado on August 30, 2024 and sell it today you would lose (10.00) from holding Banco do Estado or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Lam Research
Performance |
| Timeline |
| Banco do Estado |
| Lam Research |
Banco Do and Lam Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Lam Research
The main advantage of trading using opposite Banco Do and Lam Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Lam Research 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 Lam Research will offset losses from the drop in Lam Research's long position.| Banco Do vs. Prudential Financial | Banco Do vs. Ameriprise Financial | Banco Do vs. Lloyds Banking Group | Banco Do vs. Unifique Telecomunicaes 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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