Correlation Between Crdit Agricole and Banco Do

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

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

Diversification Opportunities for Crdit Agricole and Banco Do

0.83

Correlation Coefficient

Crdit Agricole  Banco Do

Very poor diversification

The 3 months correlation between Crdit and Banco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Crdit Agricole SA and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and Crdit Agricole 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 Crdit Agricole SA are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of Crdit Agricole i.e., Crdit Agricole and Banco Do go up and down completely randomly.

Pair Corralation between Crdit Agricole and Banco Do

Assuming the 90 days horizon Crdit Agricole SA is expected to generate 1.04 times more return on investment than Banco Do. However, Crdit Agricole is 1.04 times more volatile than Banco Do Brasil. It trades about -0.11 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.16 per unit of risk. If you would invest  1,586  in Crdit Agricole SA on September 12, 2024 and sell it today you would lose (226.00) from holding Crdit Agricole SA or give up 14.25% of portfolio value over 90 days.

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

Crdit Agricole SA  vs.  Banco Do Brasil

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crdit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile 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.

Pair Trading with Crdit Agricole and Banco Do

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

The idea behind Crdit Agricole SA and Banco Do Brasil 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.