Correlation Between Banco Mercantil and BRB Banco

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

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

Diversification Opportunities for Banco Mercantil and BRB Banco

-0.43

Correlation Coefficient

Banco Mercantil  BRB Banco

Very good diversification

The 3 months correlation between Banco and BRB is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Banco Mercantil do and BRB Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRB Banco and Banco Mercantil 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 Mercantil do are associated (or correlated) with BRB Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRB Banco has no effect on the direction of Banco Mercantil i.e., Banco Mercantil and BRB Banco go up and down completely randomly.

Pair Corralation between Banco Mercantil and BRB Banco

Assuming the 90 days trading horizon Banco Mercantil do is expected to generate 0.68 times more return on investment than BRB Banco. However, Banco Mercantil do is 1.48 times less risky than BRB Banco. It trades about 0.04 of its potential returns per unit of risk. BRB Banco is currently generating about -0.08 per unit of risk. If you would invest  3,162  in Banco Mercantil do on December 30, 2024 and sell it today you would earn a total of  118.00  from holding Banco Mercantil do or generate 3.73% return on investment over 90 days.

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

Banco Mercantil do  vs.  BRB Banco

Banco Mercantil do

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Mercantil do are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Banco Mercantil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BRB Banco

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRB Banco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Mercantil and BRB Banco

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

The idea behind Banco Mercantil do and BRB Banco 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.