Correlation Between Banco Do and Mutual Federal

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

Diversification Opportunities for Banco Do and Mutual Federal

-0.75

Correlation Coefficient

Banco Do  Mutual Federal

Pay attention - limited upside

The 3 months correlation between Banco and Mutual is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Mutual Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mutual Federal 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 Mutual Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mutual Federal Bancorp has no effect on the direction of Banco Do i.e., Banco Do and Mutual Federal go up and down completely randomly.

Pair Corralation between Banco Do and Mutual Federal

Assuming the 90 days trading horizon Banco Do is expected to generate 1.06 times less return on investment than Mutual Federal. But when comparing it to its historical volatility, Banco do Brasil is 2.19 times less risky than Mutual Federal. It trades about 0.03 of its potential returns per unit of risk. Mutual Federal Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Mutual Federal Bancorp on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Mutual Federal Bancorp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Banco do Brasil  vs.  Mutual Federal Bancorp

Banco do Brasil

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Banco Do is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mutual Federal Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mutual Federal Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Mutual Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and Mutual Federal

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

The idea behind Banco do Brasil and Mutual Federal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.