Correlation Between Banco BTG and Localiza Rent
Can any of the company-specific risk be diversified away by investing in both Banco BTG and Localiza Rent 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 Localiza Rent 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 Localiza Rent a, you can compare the effects of market volatilities on Banco BTG and Localiza Rent 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 Localiza Rent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Localiza Rent.
Diversification Opportunities for Banco BTG and Localiza Rent
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and Localiza is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Localiza Rent a in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Localiza Rent a 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 Localiza Rent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Localiza Rent a has no effect on the direction of Banco BTG i.e., Banco BTG and Localiza Rent go up and down completely randomly.
Pair Corralation between Banco BTG and Localiza Rent
Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 0.69 times more return on investment than Localiza Rent. However, Banco BTG Pactual is 1.46 times less risky than Localiza Rent. It trades about -0.13 of its potential returns per unit of risk. Localiza Rent a is currently generating about -0.1 per unit of risk. If you would invest 3,559 in Banco BTG Pactual on September 9, 2024 and sell it today you would lose (498.00) from holding Banco BTG Pactual or give up 13.99% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Banco BTG Pactual vs. Localiza Rent a
Performance |
Timeline |
Banco BTG Pactual |
Localiza Rent a |
Banco BTG and Localiza Rent Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Banco BTG and Localiza Rent
The main advantage of trading using opposite Banco BTG and Localiza Rent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Localiza Rent 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 Localiza Rent will offset losses from the drop in Localiza Rent's long position.The idea behind Banco BTG Pactual and Localiza Rent a 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.Localiza Rent vs. Lojas Renner SA | Localiza Rent vs. Raia Drogasil SA | Localiza Rent vs. Equatorial Energia SA | Localiza Rent vs. CCR SA |
Check out your portfolio center.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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Money Managers Screen money managers from public funds and ETFs managed around the world |