Correlation Between Banco BTG and Natura Co

Can any of the company-specific risk be diversified away by investing in both Banco BTG and Natura Co 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 Natura Co 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 Natura Co Holding, you can compare the effects of market volatilities on Banco BTG and Natura Co 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 Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Natura Co.

Diversification Opportunities for Banco BTG and Natura Co

0.29

Correlation Coefficient

Banco BTG  Natura Co

Modest diversification

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

Pair Corralation between Banco BTG and Natura Co

Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 0.77 times more return on investment than Natura Co. However, Banco BTG Pactual is 1.3 times less risky than Natura Co. It trades about 0.07 of its potential returns per unit of risk. Natura Co Holding is currently generating about -0.04 per unit of risk. If you would invest  2,952  in Banco BTG Pactual on December 1, 2024 and sell it today you would earn a total of  206.00  from holding Banco BTG Pactual or generate 6.98% return on investment over 90 days.

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

Banco BTG Pactual  vs.  Natura Co Holding

Banco BTG Pactual

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco BTG Pactual are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco BTG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Natura Co Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Banco BTG and Natura Co

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

The idea behind Banco BTG Pactual and Natura Co Holding 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.