Correlation Between Banco ABC and Grazziotin

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

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

Diversification Opportunities for Banco ABC and Grazziotin

-0.28

Correlation Coefficient

Banco ABC  Grazziotin

Very good diversification

The 3 months correlation between Banco and Grazziotin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Banco ABC Brasil and Grazziotin SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grazziotin SA and Banco ABC 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 ABC Brasil are associated (or correlated) with Grazziotin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grazziotin SA has no effect on the direction of Banco ABC i.e., Banco ABC and Grazziotin go up and down completely randomly.

Pair Corralation between Banco ABC and Grazziotin

Assuming the 90 days trading horizon Banco ABC Brasil is expected to generate 0.77 times more return on investment than Grazziotin. However, Banco ABC Brasil is 1.3 times less risky than Grazziotin. It trades about 0.08 of its potential returns per unit of risk. Grazziotin SA is currently generating about 0.05 per unit of risk. If you would invest  1,931  in Banco ABC Brasil on December 30, 2024 and sell it today you would earn a total of  146.00  from holding Banco ABC Brasil or generate 7.56% return on investment over 90 days.

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

Banco ABC Brasil  vs.  Grazziotin SA

Banco ABC Brasil

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco ABC Brasil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco ABC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Grazziotin SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grazziotin SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grazziotin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Banco ABC and Grazziotin

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

The idea behind Banco ABC Brasil and Grazziotin 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.