Correlation Between Banco Do and Bank Negara

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

Diversification Opportunities for Banco Do and Bank Negara

-0.24

Correlation Coefficient

Banco Do  Bank Negara

Very good diversification

The 3 months correlation between Banco and Bank is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia 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 Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Banco Do i.e., Banco Do and Bank Negara go up and down completely randomly.

Pair Corralation between Banco Do and Bank Negara

Assuming the 90 days trading horizon Banco do Brasil is expected to generate 0.23 times more return on investment than Bank Negara. However, Banco do Brasil is 4.34 times less risky than Bank Negara. It trades about 0.25 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.02 per unit of risk. If you would invest  2,362  in Banco do Brasil on December 28, 2024 and sell it today you would earn a total of  507.00  from holding Banco do Brasil or generate 21.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Banco do Brasil  vs.  Bank Negara Indonesia

Banco do Brasil

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank Negara Indonesia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Negara Indonesia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Do and Bank Negara

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

The idea behind Banco do Brasil and Bank Negara Indonesia 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.