Correlation Between Banco Macro and CF Bankshares

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

By analyzing existing cross correlation between Banco Macro SA and CF Bankshares, you can compare the effects of market volatilities on Banco Macro and CF Bankshares 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 Macro with a short position of CF Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Macro and CF Bankshares.

Diversification Opportunities for Banco Macro and CF Bankshares

0.86

Correlation Coefficient

Banco Macro  CF Bankshares

Very poor diversification

The 3 months correlation between Banco and CFBK is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares and Banco Macro 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 Macro SA are associated (or correlated) with CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of Banco Macro i.e., Banco Macro and CF Bankshares go up and down completely randomly.

Pair Corralation between Banco Macro and CF Bankshares

Considering the 90-day investment horizon Banco Macro SA is expected to generate 1.27 times more return on investment than CF Bankshares. However, Banco Macro is 1.27 times more volatile than CF Bankshares. It trades about 0.16 of its potential returns per unit of risk. CF Bankshares is currently generating about 0.14 per unit of risk. If you would invest  6,955  in Banco Macro SA on September 17, 2024 and sell it today you would earn a total of  2,343  from holding Banco Macro SA or generate 33.69% return on investment over 90 days.

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

Banco Macro SA  vs.  CF Bankshares

Banco Macro SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

CF Bankshares

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Macro and CF Bankshares

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

The idea behind Banco Macro SA and CF Bankshares 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.