Correlation Between Banco De and Truxton

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

By analyzing existing cross correlation between Banco De Chile and Truxton, you can compare the effects of market volatilities on Banco De and Truxton 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 De with a short position of Truxton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Truxton.

Diversification Opportunities for Banco De and Truxton

-0.29

Correlation Coefficient

Banco De  Truxton

Very good diversification

The 3 months correlation between Banco and Truxton is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Truxton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truxton and Banco De 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 De Chile are associated (or correlated) with Truxton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truxton has no effect on the direction of Banco De i.e., Banco De and Truxton go up and down completely randomly.

Pair Corralation between Banco De and Truxton

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.61 times more return on investment than Truxton. However, Banco De Chile is 1.63 times less risky than Truxton. It trades about 0.05 of its potential returns per unit of risk. Truxton is currently generating about 0.02 per unit of risk. If you would invest  1,698  in Banco De Chile on October 8, 2024 and sell it today you would earn a total of  545.00  from holding Banco De Chile or generate 32.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.52%
Values	Daily Returns

Banco De Chile  vs.  Truxton

Banco De Chile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco De Chile 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 recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Truxton

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truxton are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Truxton 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 De and Truxton

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

The idea behind Banco De Chile and Truxton 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.