Correlation Between Financeira Alfa and Banco Alfa

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

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

Diversification Opportunities for Financeira Alfa and Banco Alfa

1.0

Correlation Coefficient

Financeira Alfa  Banco Alfa

No risk reduction

The 3 months correlation between Financeira and Banco is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Financeira Alfa SA and Banco Alfa de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Alfa de and Financeira Alfa 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 Financeira Alfa SA are associated (or correlated) with Banco Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Alfa de has no effect on the direction of Financeira Alfa i.e., Financeira Alfa and Banco Alfa go up and down completely randomly.

Pair Corralation between Financeira Alfa and Banco Alfa

If you would invest  1,286  in Banco Alfa de on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Banco Alfa de or generate 0.0% return on investment over 90 days.

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

Financeira Alfa SA  vs.  Banco Alfa de

Financeira Alfa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financeira Alfa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Financeira Alfa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Alfa de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Alfa de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco Alfa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Financeira Alfa and Banco Alfa

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

The idea behind Financeira Alfa SA and Banco Alfa 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.