Correlation Between Companhia and Banco Mercantil
Can any of the company-specific risk be diversified away by investing in both Companhia and Banco Mercantil 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 Companhia and Banco Mercantil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Banco Mercantil do, you can compare the effects of market volatilities on Companhia and Banco Mercantil 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 Companhia with a short position of Banco Mercantil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Banco Mercantil.
Diversification Opportunities for Companhia and Banco Mercantil
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Companhia and Banco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Banco Mercantil do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Mercantil do and Companhia 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 Companhia de Saneamento are associated (or correlated) with Banco Mercantil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Mercantil do has no effect on the direction of Companhia i.e., Companhia and Banco Mercantil go up and down completely randomly.
Pair Corralation between Companhia and Banco Mercantil
Assuming the 90 days trading horizon Companhia de Saneamento is expected to under-perform the Banco Mercantil. But the stock apears to be less risky and, when comparing its historical volatility, Companhia de Saneamento is 2.83 times less risky than Banco Mercantil. The stock trades about -0.16 of its potential returns per unit of risk. The Banco Mercantil do is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,912 in Banco Mercantil do on August 29, 2024 and sell it today you would earn a total of 193.00 from holding Banco Mercantil do or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Banco Mercantil do
Performance |
| Timeline |
| Companhia de Saneamento |
| Banco Mercantil do |
Companhia and Banco Mercantil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Banco Mercantil
The main advantage of trading using opposite Companhia and Banco Mercantil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, Banco Mercantil 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 Mercantil will offset losses from the drop in Banco Mercantil's long position.| Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Alupar Investimento SA | Companhia vs. Banco do Estado |
| Banco Mercantil vs. BB Seguridade Participacoes | Banco Mercantil vs. Banco ABC Brasil | Banco Mercantil vs. Companhia de Saneamento | Banco Mercantil vs. CTEEP Companhia |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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