Correlation Between Banco Do and Banestes

Can any of the company-specific risk be diversified away by investing in both Banco Do and Banestes 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 Banestes 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 Banestes SA , you can compare the effects of market volatilities on Banco Do and Banestes 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 Banestes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Banestes.

Diversification Opportunities for Banco Do and Banestes

0.85

Correlation Coefficient

Banco Do  Banestes

Very poor diversification

The 3 months correlation between Banco and Banestes is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Banestes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banestes SA 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 Banestes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banestes SA has no effect on the direction of Banco Do i.e., Banco Do and Banestes go up and down completely randomly.

Pair Corralation between Banco Do and Banestes

Assuming the 90 days trading horizon Banco do Estado is expected to under-perform the Banestes. In addition to that, Banco Do is 1.17 times more volatile than Banestes SA . It trades about -0.19 of its total potential returns per unit of risk. Banestes SA is currently generating about -0.14 per unit of volatility. If you would invest  941.00  in Banestes SA on September 4, 2024 and sell it today you would lose (78.00) from holding Banestes SA or give up 8.29% of portfolio value over 90 days.

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

Banco do Estado  vs.  Banestes SA

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Banestes SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banestes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred 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.

Pair Trading with Banco Do and Banestes

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

The idea behind Banco do Estado and Banestes SA 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.