Correlation Between WEG SA and Banco Do
Can any of the company-specific risk be diversified away by investing in both WEG SA 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 WEG SA and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEG SA and Banco do Brasil, you can compare the effects of market volatilities on WEG SA 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 WEG SA with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEG SA and Banco Do.
Diversification Opportunities for WEG SA and Banco Do
Very good diversification
The 3 months correlation between WEG and Banco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA 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 WEG SA 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 WEG SA 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 WEG SA i.e., WEG SA and Banco Do go up and down completely randomly.
Pair Corralation between WEG SA and Banco Do
Assuming the 90 days trading horizon WEG SA is expected to generate 0.8 times more return on investment than Banco Do. However, WEG SA is 1.25 times less risky than Banco Do. It trades about -0.01 of its potential returns per unit of risk. Banco do Brasil is currently generating about -0.11 per unit of risk. If you would invest 5,577 in WEG SA on September 8, 2024 and sell it today you would lose (17.00) from holding WEG SA or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEG SA vs. Banco do Brasil
Performance |
| Timeline |
| WEG SA |
| Banco do Brasil |
WEG SA and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEG SA and Banco Do
The main advantage of trading using opposite WEG SA and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA 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.The idea behind WEG SA and Banco do Brasil 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 Do vs. Banco Bradesco SA | Banco Do vs. Petrleo Brasileiro SA | Banco Do vs. Ita Unibanco Holding | Banco Do vs. Itasa Investimentos |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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