Correlation Between American International and BB Seguridade

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

By analyzing existing cross correlation between American International Group and BB Seguridade Participacoes, you can compare the effects of market volatilities on American International and BB Seguridade 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 American International with a short position of BB Seguridade. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and BB Seguridade.

Diversification Opportunities for American International and BB Seguridade

-0.4

Correlation Coefficient

American International  BB Seguridade

Very good diversification

The 3 months correlation between American and BBSEY is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic and American International 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 American International Group are associated (or correlated) with BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of American International i.e., American International and BB Seguridade go up and down completely randomly.

Pair Corralation between American International and BB Seguridade

Considering the 90-day investment horizon American International Group is expected to under-perform the BB Seguridade. But the stock apears to be less risky and, when comparing its historical volatility, American International Group is 2.42 times less risky than BB Seguridade. The stock trades about -0.19 of its potential returns per unit of risk. The BB Seguridade Participacoes is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  549.00  in BB Seguridade Participacoes on September 30, 2024 and sell it today you would earn a total of  36.00  from holding BB Seguridade Participacoes or generate 6.56% return on investment over 90 days.

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

American International Group  vs.  BB Seguridade Participacoes

American International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with American International and BB Seguridade

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

The idea behind American International Group and BB Seguridade Participacoes 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.