Correlation Between Banco Do and BRB Banco

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

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

Diversification Opportunities for Banco Do and BRB Banco

0.79

Correlation Coefficient

Banco Do  BRB Banco

Poor diversification

The 3 months correlation between Banco and BRB is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and BRB Banco de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRB Banco de 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 Estado are associated (or correlated) with BRB Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRB Banco de has no effect on the direction of Banco Do i.e., Banco Do and BRB Banco go up and down completely randomly.

Pair Corralation between Banco Do and BRB Banco

Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.56 times more return on investment than BRB Banco. However, Banco do Estado is 1.8 times less risky than BRB Banco. It trades about -0.16 of its potential returns per unit of risk. BRB Banco de is currently generating about -0.17 per unit of risk. If you would invest  1,348  in Banco do Estado on August 31, 2024 and sell it today you would lose (144.00) from holding Banco do Estado or give up 10.68% of portfolio value over 90 days.

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

Banco do Estado  vs.  BRB Banco de

Banco do Estado

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco do Estado has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BRB Banco de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRB Banco de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Do and BRB Banco

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

The idea behind Banco do Estado and BRB Banco de 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.