Correlation Between BB Renda and FDO INV

Can any of the company-specific risk be diversified away by investing in both BB Renda and FDO INV 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 BB Renda and FDO INV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BB Renda Corporativa and FDO INV CAD, you can compare the effects of market volatilities on BB Renda and FDO INV 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 BB Renda with a short position of FDO INV. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Renda and FDO INV.

Diversification Opportunities for BB Renda and FDO INV

0.87

Correlation Coefficient

BB Renda  FDO INV

Very poor diversification

The 3 months correlation between BBRC11 and FDO is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BB Renda Corporativa and FDO INV CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO INV CAD and BB Renda 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 BB Renda Corporativa are associated (or correlated) with FDO INV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO INV CAD has no effect on the direction of BB Renda i.e., BB Renda and FDO INV go up and down completely randomly.

Pair Corralation between BB Renda and FDO INV

Assuming the 90 days trading horizon BB Renda Corporativa is expected to generate 0.5 times more return on investment than FDO INV. However, BB Renda Corporativa is 2.0 times less risky than FDO INV. It trades about -0.05 of its potential returns per unit of risk. FDO INV CAD is currently generating about -0.15 per unit of risk. If you would invest  11,491  in BB Renda Corporativa on September 4, 2024 and sell it today you would lose (573.00) from holding BB Renda Corporativa or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	88.71%
Values	Daily Returns

BB Renda Corporativa  vs.  FDO INV CAD

BB Renda Corporativa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Renda Corporativa has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, BB Renda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FDO INV CAD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDO INV CAD has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with BB Renda and FDO INV

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

The idea behind BB Renda Corporativa and FDO INV CAD 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 Global Correlations module to find global opportunities by holding instruments from different markets.