Correlation Between Bank of Botetourt and Caixabank

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

By analyzing existing cross correlation between Bank of Botetourt and Caixabank SA ADR, you can compare the effects of market volatilities on Bank of Botetourt and Caixabank 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 Bank of Botetourt with a short position of Caixabank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Botetourt and Caixabank.

Diversification Opportunities for Bank of Botetourt and Caixabank

-0.47

Correlation Coefficient

Bank of Botetourt  Caixabank

Very good diversification

The 3 months correlation between Bank and Caixabank is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Botetourt and Caixabank SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA ADR and Bank of Botetourt 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 Bank of Botetourt are associated (or correlated) with Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA ADR has no effect on the direction of Bank of Botetourt i.e., Bank of Botetourt and Caixabank go up and down completely randomly.

Pair Corralation between Bank of Botetourt and Caixabank

Given the investment horizon of 90 days Bank of Botetourt is expected to generate 1.01 times less return on investment than Caixabank. But when comparing it to its historical volatility, Bank of Botetourt is 3.05 times less risky than Caixabank. It trades about 0.07 of its potential returns per unit of risk. Caixabank SA ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Caixabank SA ADR on October 25, 2024 and sell it today you would earn a total of  3.00  from holding Caixabank SA ADR or generate 1.6% return on investment over 90 days.

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

Bank of Botetourt  vs.  Caixabank SA ADR

Bank of Botetourt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caixabank SA ADR

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Bank of Botetourt and Caixabank

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

The idea behind Bank of Botetourt and Caixabank SA ADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.