Correlation Between Banco Do and CCCB Bancorp

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

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

Diversification Opportunities for Banco Do and CCCB Bancorp

-0.63

Correlation Coefficient

Banco Do  CCCB Bancorp

Excellent diversification

The 3 months correlation between Banco and CCCB is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and CCCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCCB Bancorp and Banco Do 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 do Brasil are associated (or correlated) with CCCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCCB Bancorp has no effect on the direction of Banco Do i.e., Banco Do and CCCB Bancorp go up and down completely randomly.

Pair Corralation between Banco Do and CCCB Bancorp

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the CCCB Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 2.72 times less risky than CCCB Bancorp. The stock trades about -0.21 of its potential returns per unit of risk. The CCCB Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  497.00  in CCCB Bancorp on September 5, 2024 and sell it today you would earn a total of  83.00  from holding CCCB Bancorp or generate 16.7% return on investment over 90 days.

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

Banco do Brasil  vs.  CCCB Bancorp

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

CCCB Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CCCB Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CCCB Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Do and CCCB Bancorp

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

The idea behind Banco do Brasil and CCCB Bancorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.