Correlation Between Hang Seng and Banco Do
Can any of the company-specific risk be diversified away by investing in both Hang Seng 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 Hang Seng and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hang Seng Bank and Banco Do Brasil, you can compare the effects of market volatilities on Hang Seng 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 Hang Seng with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Seng and Banco Do.
Diversification Opportunities for Hang Seng and Banco Do
Very good diversification
The 3 months correlation between Hang and Banco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank 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 Hang Seng 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 Hang Seng Bank 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 Hang Seng i.e., Hang Seng and Banco Do go up and down completely randomly.
Pair Corralation between Hang Seng and Banco Do
Assuming the 90 days horizon Hang Seng Bank is expected to under-perform the Banco Do. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hang Seng Bank is 1.18 times less risky than Banco Do. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Banco Do Brasil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 408.00 in Banco Do Brasil on August 31, 2024 and sell it today you would earn a total of 7.00 from holding Banco Do Brasil or generate 1.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Hang Seng Bank vs. Banco Do Brasil
Performance |
| Timeline |
| Hang Seng Bank |
| Banco Do Brasil |
Hang Seng and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hang Seng and Banco Do
The main advantage of trading using opposite Hang Seng and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Seng 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.| Hang Seng vs. Bank Mandiri Persero | Hang Seng vs. Piraeus Bank SA | Hang Seng vs. Eurobank Ergasias Services | Hang Seng vs. Kasikornbank Public Co |
| Banco Do vs. BB Seguridade Participacoes | Banco Do vs. Banco Santander Brasil | Banco Do vs. Centrais Electricas Brasileiras | Banco Do vs. Itau Unibanco Banco |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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