Correlation Between Transportadora and BBVA Banco
Can any of the company-specific risk be diversified away by investing in both Transportadora and BBVA Banco 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 Transportadora and BBVA Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transportadora de Gas and BBVA Banco Frances, you can compare the effects of market volatilities on Transportadora and BBVA Banco 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 Transportadora with a short position of BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and BBVA Banco.
Diversification Opportunities for Transportadora and BBVA Banco
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Transportadora and BBVA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Transportadora 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 Transportadora de Gas are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Transportadora i.e., Transportadora and BBVA Banco go up and down completely randomly.
Pair Corralation between Transportadora and BBVA Banco
Assuming the 90 days trading horizon Transportadora de Gas is expected to under-perform the BBVA Banco. But the stock apears to be less risky and, when comparing its historical volatility, Transportadora de Gas is 1.41 times less risky than BBVA Banco. The stock trades about -0.1 of its potential returns per unit of risk. The BBVA Banco Frances is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 667,000 in BBVA Banco Frances on October 20, 2024 and sell it today you would earn a total of 196,000 from holding BBVA Banco Frances or generate 29.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transportadora de Gas vs. BBVA Banco Frances
Performance |
| Timeline |
| Transportadora de Gas |
| BBVA Banco Frances |
Transportadora and BBVA Banco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transportadora and BBVA Banco
The main advantage of trading using opposite Transportadora and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.| Transportadora vs. Naturgy BAN SA | Transportadora vs. Distribuidora de Gas | Transportadora vs. Walmart | Transportadora vs. Central Puerto SA |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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