Correlation Between Nomura Holdings and Banco Do

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

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

Diversification Opportunities for Nomura Holdings and Banco Do

-0.74

Correlation Coefficient

Nomura Holdings  Banco Do

Pay attention - limited upside

The 3 months correlation between Nomura and Banco is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Holdings and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and Nomura Holdings 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 Nomura Holdings 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 Estado has no effect on the direction of Nomura Holdings i.e., Nomura Holdings and Banco Do go up and down completely randomly.

Pair Corralation between Nomura Holdings and Banco Do

Assuming the 90 days trading horizon Nomura Holdings is expected to generate 2.03 times more return on investment than Banco Do. However, Nomura Holdings is 2.03 times more volatile than Banco do Estado. It trades about 0.1 of its potential returns per unit of risk. Banco do Estado is currently generating about -0.14 per unit of risk. If you would invest  3,173  in Nomura Holdings on September 3, 2024 and sell it today you would earn a total of  443.00  from holding Nomura Holdings or generate 13.96% return on investment over 90 days.

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

Nomura Holdings  vs.  Banco do Estado

Nomura Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nomura Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Nomura Holdings and Banco Do

The main advantage of trading using opposite Nomura Holdings and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nomura Holdings 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 Nomura Holdings and Banco do Estado 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.