Correlation Between Fras Le and Banco BTG
Can any of the company-specific risk be diversified away by investing in both Fras Le and Banco BTG 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 Fras Le and Banco BTG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Banco BTG Pactual, you can compare the effects of market volatilities on Fras Le and Banco BTG 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 Fras Le with a short position of Banco BTG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Banco BTG.
Diversification Opportunities for Fras Le and Banco BTG
Excellent diversification
The 3 months correlation between Fras and Banco is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual and Fras Le 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 Fras le SA are associated (or correlated) with Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of Fras Le i.e., Fras Le and Banco BTG go up and down completely randomly.
Pair Corralation between Fras Le and Banco BTG
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Banco BTG. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.55 times less risky than Banco BTG. The stock trades about -0.25 of its potential returns per unit of risk. The Banco BTG Pactual is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,532 in Banco BTG Pactual on August 31, 2024 and sell it today you would lose (66.00) from holding Banco BTG Pactual or give up 4.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fras le SA vs. Banco BTG Pactual
Performance |
| Timeline |
| Fras le SA |
| Banco BTG Pactual |
Fras Le and Banco BTG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Banco BTG
The main advantage of trading using opposite Fras Le and Banco BTG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Banco BTG 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 BTG will offset losses from the drop in Banco BTG's long position.The idea behind Fras le SA and Banco BTG Pactual 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.| Banco BTG vs. Banco BTG Pactual | Banco BTG vs. Banco BTG Pactual | Banco BTG vs. Banco Pan SA | Banco BTG vs. Banco Santander 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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