Correlation Between Banco BTG and Hsi Malls

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

Diversification Opportunities for Banco BTG and Hsi Malls

0.88

Correlation Coefficient

Banco BTG  Hsi Malls

Very poor diversification

The 3 months correlation between Banco and Hsi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Hsi Malls Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsi Malls Fundo 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 Hsi Malls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsi Malls Fundo has no effect on the direction of Banco BTG i.e., Banco BTG and Hsi Malls go up and down completely randomly.

Pair Corralation between Banco BTG and Hsi Malls

Assuming the 90 days trading horizon Banco BTG Pactual is expected to generate 1.98 times more return on investment than Hsi Malls. However, Banco BTG is 1.98 times more volatile than Hsi Malls Fundo. It trades about 0.23 of its potential returns per unit of risk. Hsi Malls Fundo is currently generating about 0.23 per unit of risk. If you would invest  1,399  in Banco BTG Pactual on December 30, 2024 and sell it today you would earn a total of  466.00  from holding Banco BTG Pactual or generate 33.31% return on investment over 90 days.

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

Banco BTG Pactual  vs.  Hsi Malls Fundo

Banco BTG Pactual

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco BTG Pactual are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco BTG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hsi Malls Fundo

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hsi Malls Fundo are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak primary indicators, Hsi Malls sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco BTG and Hsi Malls

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

The idea behind Banco BTG Pactual and Hsi Malls Fundo 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.