Correlation Between Banco BTG and Rumo SA

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

Diversification Opportunities for Banco BTG and Rumo SA

0.84

Correlation Coefficient

Banco BTG  Rumo SA

Very poor diversification

The 3 months correlation between Banco and Rumo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Rumo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumo SA 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 Rumo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumo SA has no effect on the direction of Banco BTG i.e., Banco BTG and Rumo SA go up and down completely randomly.

Pair Corralation between Banco BTG and Rumo SA

Assuming the 90 days trading horizon Banco BTG Pactual is expected to under-perform the Rumo SA. In addition to that, Banco BTG is 1.06 times more volatile than Rumo SA. It trades about -0.15 of its total potential returns per unit of risk. Rumo SA is currently generating about -0.14 per unit of volatility. If you would invest  2,179  in Rumo SA on September 5, 2024 and sell it today you would lose (303.00) from holding Rumo SA or give up 13.91% of portfolio value over 90 days.

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

Banco BTG Pactual  vs.  Rumo SA

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.

Rumo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rumo SA 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 Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco BTG and Rumo SA

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

The idea behind Banco BTG Pactual and Rumo SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..