Correlation Between Banco Do and MNB Holdings

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

Diversification Opportunities for Banco Do and MNB Holdings

-0.44

Correlation Coefficient

Banco Do  MNB Holdings

Very good diversification

The 3 months correlation between Banco and MNB is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and MNB Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNB Holdings Corp 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 MNB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNB Holdings Corp has no effect on the direction of Banco Do i.e., Banco Do and MNB Holdings go up and down completely randomly.

Pair Corralation between Banco Do and MNB Holdings

Assuming the 90 days trading horizon Banco do Brasil is expected to generate 0.85 times more return on investment than MNB Holdings. However, Banco do Brasil is 1.17 times less risky than MNB Holdings. It trades about 0.05 of its potential returns per unit of risk. MNB Holdings Corp is currently generating about -0.02 per unit of risk. If you would invest  1,627  in Banco do Brasil on October 15, 2024 and sell it today you would earn a total of  794.00  from holding Banco do Brasil or generate 48.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Banco do Brasil  vs.  MNB Holdings Corp

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 comparatively stable basic indicators, Banco Do is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

MNB Holdings Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MNB Holdings Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, MNB Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and MNB Holdings

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

The idea behind Banco do Brasil and MNB Holdings Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.