Correlation Between Banco De and Agricultural Bank

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

By analyzing existing cross correlation between Banco de Sabadell and Agricultural Bank of, you can compare the effects of market volatilities on Banco De and Agricultural Bank 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 Agricultural Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Agricultural Bank.

Diversification Opportunities for Banco De and Agricultural Bank

0.83

Correlation Coefficient

Banco De  Agricultural Bank

Very poor diversification

The 3 months correlation between Banco and Agricultural is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Sabadell and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Sabadell are associated (or correlated) with Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Banco De i.e., Banco De and Agricultural Bank go up and down completely randomly.

Pair Corralation between Banco De and Agricultural Bank

Assuming the 90 days horizon Banco de Sabadell is expected to generate 2.74 times more return on investment than Agricultural Bank. However, Banco De is 2.74 times more volatile than Agricultural Bank of. It trades about 0.21 of its potential returns per unit of risk. Agricultural Bank of is currently generating about 0.06 per unit of risk. If you would invest  186.00  in Banco de Sabadell on December 30, 2024 and sell it today you would earn a total of  108.00  from holding Banco de Sabadell or generate 58.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.77%
Values	Daily Returns

Banco de Sabadell  vs.  Agricultural Bank of

Banco de Sabadell

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Banco De reported solid returns over the last few months and may actually be approaching a breakup point.

Agricultural Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Agricultural Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco De and Agricultural Bank

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

The idea behind Banco de Sabadell and Agricultural Bank of 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.