Correlation Between Banco Do and Exxon Mobil

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

Diversification Opportunities for Banco Do and Exxon Mobil

-0.51

Correlation Coefficient

Banco Do  Exxon Mobil

Excellent diversification

The 3 months correlation between Banco and Exxon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Banco Do i.e., Banco Do and Exxon Mobil go up and down completely randomly.

Pair Corralation between Banco Do and Exxon Mobil

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Exxon Mobil. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 1.06 times less risky than Exxon Mobil. The stock trades about -0.19 of its potential returns per unit of risk. The Exxon Mobil is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  8,761  in Exxon Mobil on September 25, 2024 and sell it today you would lose (513.00) from holding Exxon Mobil or give up 5.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Banco do Brasil  vs.  Exxon Mobil

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 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.

Exxon Mobil

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Exxon Mobil is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and Exxon Mobil

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

The idea behind Banco do Brasil and Exxon Mobil 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.