Correlation Between Banco BTG and Ambipar Participaes

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

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

Diversification Opportunities for Banco BTG and Ambipar Participaes

-0.65

Correlation Coefficient

Banco BTG  Ambipar Participaes

Excellent diversification

The 3 months correlation between Banco and Ambipar is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Ambipar Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambipar Participaes and Banco BTG 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 BTG Pactual are associated (or correlated) with Ambipar Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambipar Participaes has no effect on the direction of Banco BTG i.e., Banco BTG and Ambipar Participaes go up and down completely randomly.

Pair Corralation between Banco BTG and Ambipar Participaes

Assuming the 90 days trading horizon Banco BTG Pactual is expected to under-perform the Ambipar Participaes. But the stock apears to be less risky and, when comparing its historical volatility, Banco BTG Pactual is 3.45 times less risky than Ambipar Participaes. The stock trades about -0.15 of its potential returns per unit of risk. The Ambipar Participaes e is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  6,594  in Ambipar Participaes e on September 4, 2024 and sell it today you would earn a total of  9,717  from holding Ambipar Participaes e or generate 147.36% return on investment over 90 days.

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

Banco BTG Pactual  vs.  Ambipar Participaes e

Banco BTG Pactual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco BTG Pactual has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock'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 company investors.

Ambipar Participaes

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambipar Participaes e are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ambipar Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco BTG and Ambipar Participaes

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

The idea behind Banco BTG Pactual and Ambipar Participaes e 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.