Correlation Between Banco Do and Banco ABC
Can any of the company-specific risk be diversified away by investing in both Banco Do and Banco ABC 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 ABC 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 ABC Brasil, you can compare the effects of market volatilities on Banco Do and Banco ABC 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 ABC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Banco ABC.
Diversification Opportunities for Banco Do and Banco ABC
Very weak diversification
The 3 months correlation between Banco and Banco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Banco ABC Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco ABC Brasil 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 ABC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco ABC Brasil has no effect on the direction of Banco Do i.e., Banco Do and Banco ABC go up and down completely randomly.
Pair Corralation between Banco Do and Banco ABC
Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.83 times more return on investment than Banco ABC. However, Banco do Estado is 1.21 times less risky than Banco ABC. It trades about 0.16 of its potential returns per unit of risk. Banco ABC Brasil is currently generating about 0.09 per unit of risk. If you would invest 975.00 in Banco do Estado on November 18, 2024 and sell it today you would earn a total of 55.00 from holding Banco do Estado or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco do Estado vs. Banco ABC Brasil
Performance |
| Timeline |
| Banco do Estado |
| Banco ABC Brasil |
Banco Do and Banco ABC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Do and Banco ABC
The main advantage of trading using opposite Banco Do and Banco ABC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Banco ABC 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 ABC will offset losses from the drop in Banco ABC's long position.| Banco Do vs. BB Seguridade Participacoes | Banco Do vs. Banco ABC Brasil | Banco Do vs. Companhia de Saneamento | Banco Do vs. CTEEP Companhia |
| Banco ABC vs. Banco do Estado | Banco ABC vs. MAHLE Metal Leve | Banco ABC vs. Tupy SA | Banco ABC vs. BB Seguridade Participacoes |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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