Correlation Between Banco Do and Mountain Pacific

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

Diversification Opportunities for Banco Do and Mountain Pacific

-0.11

Correlation Coefficient

Banco Do  Mountain Pacific

Good diversification

The 3 months correlation between Banco and Mountain is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Mountain Pacific Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Pacific 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 Mountain Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Pacific Bancorp has no effect on the direction of Banco Do i.e., Banco Do and Mountain Pacific go up and down completely randomly.

Pair Corralation between Banco Do and Mountain Pacific

Assuming the 90 days trading horizon Banco do Brasil is expected to generate 1.2 times more return on investment than Mountain Pacific. However, Banco Do is 1.2 times more volatile than Mountain Pacific Bancorp. It trades about 0.13 of its potential returns per unit of risk. Mountain Pacific Bancorp is currently generating about -0.12 per unit of risk. If you would invest  2,440  in Banco do Brasil on December 1, 2024 and sell it today you would earn a total of  291.00  from holding Banco do Brasil or generate 11.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Banco do Brasil  vs.  Mountain Pacific Bancorp

Banco do Brasil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Banco Do may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mountain Pacific Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mountain Pacific Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco Do and Mountain Pacific

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

The idea behind Banco do Brasil and Mountain Pacific 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.