Correlation Between Banco Do and Intesa Sanpaolo

Can any of the company-specific risk be diversified away by investing in both Banco Do and Intesa Sanpaolo 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 Do and Intesa Sanpaolo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Do Brasil and Intesa Sanpaolo SpA, you can compare the effects of market volatilities on Banco Do and Intesa Sanpaolo 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 Do with a short position of Intesa Sanpaolo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Intesa Sanpaolo.

Diversification Opportunities for Banco Do and Intesa Sanpaolo

0.35

Correlation Coefficient

Banco Do  Intesa Sanpaolo

Weak diversification

The 3 months correlation between Banco and Intesa is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Banco Do Brasil and Intesa Sanpaolo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intesa Sanpaolo SpA and Banco Do 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 Do Brasil are associated (or correlated) with Intesa Sanpaolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intesa Sanpaolo SpA has no effect on the direction of Banco Do i.e., Banco Do and Intesa Sanpaolo go up and down completely randomly.

Pair Corralation between Banco Do and Intesa Sanpaolo

Assuming the 90 days horizon Banco Do Brasil is expected to under-perform the Intesa Sanpaolo. In addition to that, Banco Do is 1.29 times more volatile than Intesa Sanpaolo SpA. It trades about -0.16 of its total potential returns per unit of risk. Intesa Sanpaolo SpA is currently generating about -0.06 per unit of volatility. If you would invest  2,466  in Intesa Sanpaolo SpA on September 4, 2024 and sell it today you would lose (159.00) from holding Intesa Sanpaolo SpA or give up 6.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Banco Do Brasil  vs.  Intesa Sanpaolo SpA

Banco Do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Intesa Sanpaolo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intesa Sanpaolo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Intesa Sanpaolo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and Intesa Sanpaolo

The main advantage of trading using opposite Banco Do and Intesa Sanpaolo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do position performs unexpectedly, Intesa Sanpaolo 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 Intesa Sanpaolo will offset losses from the drop in Intesa Sanpaolo's long position.

The idea behind Banco Do Brasil and Intesa Sanpaolo SpA 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.