Correlation Between Allianz SE and BB Seguridade

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

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

Diversification Opportunities for Allianz SE and BB Seguridade

0.47

Correlation Coefficient

Allianz SE  BB Seguridade

Very weak diversification

The 3 months correlation between Allianz and BBSEY is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE 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 Allianz SE 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 Allianz SE 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 Allianz SE i.e., Allianz SE and BB Seguridade go up and down completely randomly.

Pair Corralation between Allianz SE and BB Seguridade

Assuming the 90 days horizon Allianz SE is expected to generate 0.98 times more return on investment than BB Seguridade. However, Allianz SE is 1.02 times less risky than BB Seguridade. It trades about -0.01 of its potential returns per unit of risk. BB Seguridade Participacoes is currently generating about -0.06 per unit of risk. If you would invest  31,750  in Allianz SE on September 15, 2024 and sell it today you would lose (742.00) from holding Allianz SE or give up 2.34% of portfolio value over 90 days.

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

Allianz SE  vs.  BB Seguridade Participacoes

Allianz SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allianz SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Allianz SE is not utilizing all of its potentials. The current 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 Allianz SE and BB Seguridade

The main advantage of trading using opposite Allianz SE and BB Seguridade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz SE 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 Allianz SE 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.