Correlation Between Banco Do and InsCorp

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

Diversification Opportunities for Banco Do and InsCorp

-0.8

Correlation Coefficient

Banco Do  InsCorp

Pay attention - limited upside

The 3 months correlation between Banco and InsCorp is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and InsCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InsCorp 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 InsCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InsCorp has no effect on the direction of Banco Do i.e., Banco Do and InsCorp go up and down completely randomly.

Pair Corralation between Banco Do and InsCorp

Assuming the 90 days trading horizon Banco do Brasil is expected to generate 0.83 times more return on investment than InsCorp. However, Banco do Brasil is 1.2 times less risky than InsCorp. It trades about 0.06 of its potential returns per unit of risk. InsCorp is currently generating about 0.03 per unit of risk. If you would invest  1,466  in Banco do Brasil on October 4, 2024 and sell it today you would earn a total of  951.00  from holding Banco do Brasil or generate 64.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	76.06%
Values	Daily Returns

Banco do Brasil  vs.  InsCorp

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.

InsCorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InsCorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, InsCorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and InsCorp

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

The idea behind Banco do Brasil and InsCorp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.