Correlation Between Transmissora Aliana and Banco Do

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

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

Diversification Opportunities for Transmissora Aliana and Banco Do

0.69

Correlation Coefficient

Transmissora Aliana  Banco Do

Poor diversification

The 3 months correlation between Transmissora and Banco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Transmissora Aliana de 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 Transmissora Aliana 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 Transmissora Aliana de 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 Transmissora Aliana i.e., Transmissora Aliana and Banco Do go up and down completely randomly.

Pair Corralation between Transmissora Aliana and Banco Do

Assuming the 90 days trading horizon Transmissora Aliana de is expected to generate 0.74 times more return on investment than Banco Do. However, Transmissora Aliana de is 1.35 times less risky than Banco Do. It trades about -0.05 of its potential returns per unit of risk. Banco do Brasil is currently generating about -0.17 per unit of risk. If you would invest  3,500  in Transmissora Aliana de on September 12, 2024 and sell it today you would lose (85.00) from holding Transmissora Aliana de or give up 2.43% of portfolio value over 90 days.

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

Transmissora Aliana de  vs.  Banco do Brasil

Transmissora Aliana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transmissora Aliana de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Transmissora Aliana is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 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 Transmissora Aliana and Banco Do

The main advantage of trading using opposite Transmissora Aliana and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transmissora Aliana 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 Transmissora Aliana de 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.