Correlation Between Xp and Banco BTG
Can any of the company-specific risk be diversified away by investing in both Xp and Banco BTG 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 Xp and Banco BTG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xp Inc and Banco BTG Pactual, you can compare the effects of market volatilities on Xp and Banco BTG 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 Xp with a short position of Banco BTG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xp and Banco BTG.
Diversification Opportunities for Xp and Banco BTG
Very poor diversification
The 3 months correlation between Xp and Banco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual and Xp 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 Xp Inc are associated (or correlated) with Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of Xp i.e., Xp and Banco BTG go up and down completely randomly.
Pair Corralation between Xp and Banco BTG
Assuming the 90 days trading horizon Xp Inc is expected to generate 1.02 times more return on investment than Banco BTG. However, Xp is 1.02 times more volatile than Banco BTG Pactual. It trades about -0.27 of its potential returns per unit of risk. Banco BTG Pactual is currently generating about -0.28 per unit of risk. If you would invest 8,799 in Xp Inc on September 25, 2024 and sell it today you would lose (1,350) from holding Xp Inc or give up 15.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Xp Inc vs. Banco BTG Pactual
Performance |
| Timeline |
| Xp Inc |
| Banco BTG Pactual |
Xp and Banco BTG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xp and Banco BTG
The main advantage of trading using opposite Xp and Banco BTG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp position performs unexpectedly, Banco BTG 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 BTG will offset losses from the drop in Banco BTG's long position.The idea behind Xp Inc and Banco BTG Pactual 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 BTG vs. The Charles Schwab | Banco BTG vs. The Goldman Sachs | Banco BTG vs. Nomura Holdings | Banco BTG vs. Xp Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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