Correlation Between Financeira Alfa and Banco Do
Can any of the company-specific risk be diversified away by investing in both Financeira Alfa and Banco Do 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 Financeira Alfa and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financeira Alfa SA and Banco do Brasil, you can compare the effects of market volatilities on Financeira Alfa and Banco Do 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 Financeira Alfa with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financeira Alfa and Banco Do.
Diversification Opportunities for Financeira Alfa and Banco Do
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Financeira and Banco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financeira Alfa SA and Banco do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Brasil and Financeira 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 Financeira Alfa SA are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Brasil has no effect on the direction of Financeira Alfa i.e., Financeira Alfa and Banco Do go up and down completely randomly.
Pair Corralation between Financeira Alfa and Banco Do
Assuming the 90 days trading horizon Financeira Alfa is expected to generate 1.57 times less return on investment than Banco Do. But when comparing it to its historical volatility, Financeira Alfa SA is 1.05 times less risky than Banco Do. It trades about 0.04 of its potential returns per unit of risk. Banco do Brasil is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,471 in Banco do Brasil on August 26, 2024 and sell it today you would earn a total of 1,089 from holding Banco do Brasil or generate 74.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Financeira Alfa SA vs. Banco do Brasil
Performance |
| Timeline |
| Financeira Alfa SA |
| Banco do Brasil |
Financeira Alfa and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financeira Alfa and Banco Do
The main advantage of trading using opposite Financeira Alfa and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financeira Alfa position performs unexpectedly, Banco Do 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 Do will offset losses from the drop in Banco Do's long position.| Financeira Alfa vs. Banco Alfa de | Financeira Alfa vs. Financeira Alfa SA | Financeira Alfa vs. Banco Alfa de | Financeira Alfa vs. Banestes SA |
| Banco Do vs. Banco Alfa de | Banco Do vs. Financeira Alfa SA | Banco Do vs. Banco Alfa de | Banco Do vs. Financeira Alfa 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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