Correlation Between Banco Pine and Banco ABC
Can any of the company-specific risk be diversified away by investing in both Banco Pine 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 Pine 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 Pine SA and Banco ABC Brasil, you can compare the effects of market volatilities on Banco Pine 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 Pine with a short position of Banco ABC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Pine and Banco ABC.
Diversification Opportunities for Banco Pine and Banco ABC
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Banco and Banco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Banco Pine SA 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 Pine 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 Pine SA 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 Pine i.e., Banco Pine and Banco ABC go up and down completely randomly.
Pair Corralation between Banco Pine and Banco ABC
Assuming the 90 days trading horizon Banco Pine SA is expected to generate 1.04 times more return on investment than Banco ABC. However, Banco Pine is 1.04 times more volatile than Banco ABC Brasil. It trades about 0.24 of its potential returns per unit of risk. Banco ABC Brasil is currently generating about 0.03 per unit of risk. If you would invest 399.00 in Banco Pine SA on October 25, 2024 and sell it today you would earn a total of 42.00 from holding Banco Pine SA or generate 10.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Pine SA vs. Banco ABC Brasil
Performance |
| Timeline |
| Banco Pine SA |
| Banco ABC Brasil |
Banco Pine and Banco ABC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Pine and Banco ABC
The main advantage of trading using opposite Banco Pine and Banco ABC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Pine 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 Pine vs. Datadog, | Banco Pine vs. METISA Metalrgica Timboense | Banco Pine vs. Costco Wholesale | Banco Pine vs. Verizon Communications |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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