Correlation Between Banco Do and China CITIC

Can any of the company-specific risk be diversified away by investing in both Banco Do and China CITIC 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 China CITIC 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 China CITIC Bank, you can compare the effects of market volatilities on Banco Do and China CITIC 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 China CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and China CITIC.

Diversification Opportunities for Banco Do and China CITIC

0.0

Correlation Coefficient

Banco Do  China CITIC

Pay attention - limited upside

The 3 months correlation between Banco and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and China CITIC Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China CITIC Bank 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 China CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China CITIC Bank has no effect on the direction of Banco Do i.e., Banco Do and China CITIC go up and down completely randomly.

Pair Corralation between Banco Do and China CITIC

If you would invest  2,362  in Banco do Brasil on December 30, 2024 and sell it today you would earn a total of  502.00  from holding Banco do Brasil or generate 21.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Banco do Brasil  vs.  China CITIC Bank

Banco do Brasil

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do unveiled solid returns over the last few months and may actually be approaching a breakup point.

China CITIC Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Banco Do and China CITIC

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

The idea behind Banco do Brasil and China CITIC Bank 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.