Correlation Between Banco Da and Banco Do

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

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

Diversification Opportunities for Banco Da and Banco Do

0.62

Correlation Coefficient

Banco Da  Banco Do

Poor diversification

The 3 months correlation between Banco and Banco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Banco da Amaznia 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 Banco Da 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 da Amaznia 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 Banco Da i.e., Banco Da and Banco Do go up and down completely randomly.

Pair Corralation between Banco Da and Banco Do

Assuming the 90 days trading horizon Banco da Amaznia is expected to generate 0.51 times more return on investment than Banco Do. However, Banco da Amaznia is 1.98 times less risky than Banco Do. It trades about -0.07 of its potential returns per unit of risk. Banco do Estado is currently generating about -0.22 per unit of risk. If you would invest  8,600  in Banco da Amaznia on October 12, 2024 and sell it today you would lose (101.00) from holding Banco da Amaznia or give up 1.17% of portfolio value over 90 days.

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

Banco da Amaznia  vs.  Banco do Estado

Banco da Amaznia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco da Amaznia 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.

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Da and Banco Do

The main advantage of trading using opposite Banco Da and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Da 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 Banco da Amaznia 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.