Correlation Between Engie Brasil and Banco Do

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Can any of the company-specific risk be diversified away by investing in both Engie Brasil 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 Engie Brasil and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engie Brasil Energia and Banco do Brasil, you can compare the effects of market volatilities on Engie Brasil 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 Engie Brasil with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie Brasil and Banco Do.

Diversification Opportunities for Engie Brasil and Banco Do

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Engie and Banco is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia 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 Engie Brasil 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 Engie Brasil Energia 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 Engie Brasil i.e., Engie Brasil and Banco Do go up and down completely randomly.

Pair Corralation between Engie Brasil and Banco Do

Assuming the 90 days trading horizon Engie Brasil Energia is expected to under-perform the Banco Do. But the stock apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 1.01 times less risky than Banco Do. The stock trades about -0.33 of its potential returns per unit of risk. The Banco do Brasil is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,574  in Banco do Brasil on September 5, 2024 and sell it today you would lose (57.00) from holding Banco do Brasil or give up 2.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Engie Brasil Energia  vs.  Banco do Brasil

 Performance 
       Timeline  
Engie Brasil Energia 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Engie Brasil Energia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Banco do Brasil 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Banco do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Engie Brasil and Banco Do Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Engie Brasil and Banco Do

The main advantage of trading using opposite Engie Brasil and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie Brasil 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.
The idea behind Engie Brasil Energia and Banco do Brasil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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